Another day, another market massacre. Right now the SEC is meeting about “improper short selling” of Morgan Stanley and Goldman Sachs stock. The Dow is down nearly 450 points.
We have definitely entered the “dogs and cats, living together, mass hysteria” phase of this meltdown.
But while everybody is running around trying to CYA, the government is giving away the store. Professor Bainbridge has nine excellent questions about the AIG bailout; questions that the government lawyers seem to be willfully ignoring. Here are some crucial ones, maybe we can help Bainbridge (and our country) out of this mess:
* On what basis does the Fed have authority to use the discount window to bail out an insurance company?
* Who would have standing to challenge the Fed action, if anyone?
* Why was AIG to big too fail but Lehman wasn’t? Was AIG’s role in the credit default swap market really that important?
* Has the federal government ever taken an equity stake–let alone a controlling stake–as part of a bailout before? Was there any equity stake in Chrysler?
See the rest of Bainbridge’s probing questions here.
There are a lot of smart men and women here. Does anybody have any idea how the federal government just shoved AIG down our collective throats?
But the financial crisis is far from over. Which firms are still left to benefit as the financial sector careens down the off ramp of success? We know Simpson Thacher has done a lot of work with Washington Mutual, and we know WaMu is about as stable as Courtney Love after a Seattle rainstorm. Will Simpson be able to cash in on a WaMu sale, or will Weil just add another bloodied notch to their belt?
As the Fed steps in to save the financial world with a bridge to nowhere AIG, we pause to reflect on the results from Monday’s ATL / Lateral Linksurvey, which asked whether the woes of Lehman Brothers and Merrill Lynch would hurt your career.
We received 830 responses, and quite a few of them looked like this one:
It’s the end of the world.
Overall, 42% of practicing attorneys said the demise of Lehman Brothers and Merrill Lynch would hurt their careers, which is way up from the 27% who said the same about Bear Stearns back in March. Law students are even more concerned, with 50% of 3Ls, 68% of 2Ls, and 63% of 1Ls feeling fearful.
While a third of New Yorkers were afraid about the impact of Bear Stearns back in March, the more recent collapses have frightened 55% of the Big Apple’s Big Law respondents. In fact, fear has risen dramatically in every market:
Responses by market: Are you afraid that the recent collapse will hurt your career?
After Merrill Lynch & Lehman Brothers
After Bear Stearns
Additional discussion, including selected comments from survey respondents, after the jump.
Back in March, we found that 27% of ATL readers — and a third of ATL readers in New York — thought the Bear Stearns collapse would hurt their careers.
With Lehman Brothers filing for bankruptcy this morning, and Merrill Lynch selling itself to Bank of America, after “a marathon series of meetings at Wachtell, Lipton, Rosen & Katz,” we can’t help but wonder how billables at Wachtell and Weil and Shearman & Sterling are going to look this month . . . and how everybody else’s are going to look over the next year (especially if other firms, like, say, AIG, go under as well).
As we asked back in March:
But how will it affect you? Will work slow down as investors circle the wagons, or will there be a regulatory response that actually increases the need for lawyers? Will shareholders’ fear of fire sales increase bankruptcy and litigation work?
In today’s ATL / Lateral Link survey, let’s find out if your thoughts are any different, now that we’ve had a little post-Bear-Stearns experience to inform our expectations. Update: This survey is now closed. Click here for the results.
– Justin Bernold is a Director at Lateral Link, the sponsor of this survey.
In case you hadn’t heard, Wall Street is in meltdown mode right now. Our colleagues over at Dealbreaker have been working over the weekend and around the clock to cover all the latest developments.
Here are the two big stories from the financial world. First, the top-level parent company of Lehman Brothers, Lehman Brothers Holdings Inc., is filing for Chapter 11 bankruptcy protection. (But no sleeping in for Lehmanites; they have been informed that they’re still expected to show up to work this morning.)
Second, Merrill Lynch, the investment bank that some feared might be next to go down the Bear Stearns / Lehman Brothers path, has reached a deal to sell itself to Bank of America, for $50 billion.
What do these deals mean for lawyers? Well, at least in the short term, they bring good news: more work. (Over the long term, of course, the news may be less good, as current and potential future clients vanish from the landscape on Wall Street.)
For its bankruptcy, Lehman is turning to Weil Gotshal & Manges, long known for its top-notch bankruptcy practice. From Dealbook:
Lehman has hired Weil, Gotshal & Manges, the law firm that handled Drexel [Burnham Lambert]‘s bankruptcy filing [in 1990]. Harvey Miller, the head of Weil’s restructuring practice, is known as one of the deans of the bankruptcy bar.
In addition, Lehman is trying to sell its more valuable assets, including its broker-dealer and asset-management operations. It appears to be represented in those efforts by Sullivan & Cromwell, according to TheDeal.com (subscription). Meanwhile, Wachtell, Lipton, Rosen & Katz, a powerhouse in financial-institutions M&A, is getting a piece of the action on the Merrill deal. As reported by the Wall Street Journal, the Merrill / B of A deal was hammered out in “a marathon series of meetings at Wachtell, Lipton, Rosen & Katz, the law firm which has long represented Bank of America in its deals.” Wachtell isn’t lending out their offices for free. As TheDeal.com reports, WLRK is indeed representing Bank of America in the transaction (for a fee that will be well into the eight figures — Ed Herlihy doesn’t come cheap). Merrill Lynch is being advised by Shearman & Sterling.
If you’re aware of other winners and losers from these deals, please share what you know, in the comments. Lehman Announces Bankruptcy Filing For Holding Company [Dealbreaker] Bank of America Reaches Deal To Buy Merrill Lynch [Dealbreaker] What a Lehman Bankruptcy Filing Might Look Like [DealBook] Bank of America to Buy Merrill [Wall Street Journal]
The constitutionality of the Public Company Accounting Oversight Board, enacted as part of the Sarbanes-Oxley Act, was recently upheld — decision available here (PDF) — by a divided panel of the D.C. Circuit. But those who challenged the Board’s legitimacy are fighting on.
The appellants will either seek rehearing en banc in the D.C. Circuit or certiorari from the Supreme Court. In their efforts, expect them to draw support from the forceful dissent by judicial superstar Brett Kavanaugh (who is, by the way, familiar with this fine website).
If appellants seek succor from the SCOTUS, their pleas may fall upon sympathetic ears. From our colleague, former Skadden and Latham corporate lawyer John Carney, over at Dealbreaker:
Perhaps the most ominous sign for the PCAOB is the fact that Judge Kavanaugh clerked for Supreme Court Justice Anthony Kennedy, who would probably hold the swing vote if the case went to the Supreme Court. His dissenting opinion seems tailor-made to provoke the conservative wing of the court into striking down the board. Unless Congress acts to amend it, we’d bet the autonomous PCAOB is headed for extinction.
* Why does Wall Street get all the juicy scandals? We’re jealous of our DealBreaker colleagues. [Dealbreaker]
* Larry Ribstein’s take: “it’s hard not to think that it’s really all about dispute a few weeks ago between [the NYT's Andrew Ross] Sorkin and Dealbreaker’s John Carney.” [Ideoblog]
* Are you in the top one percent of U.S. taxpayers ranked by adjusted gross income? And which states are home to the richest of rich taxpayers? [TaxProf Blog]
* “Would you trust a law professor to be President?” [Althouse]
* Speaking of law profs, they may boycott the annual AALS meeting, due to the hotel owner’s opposition to same-sex marriage. [National Law Journal via TaxProf Blog]
* An interesting interview of Fried Frank partner Jonathan Mechanic, a superstar of the real estate bar. [New York Observer]
* Russian judge: “If we had no sexual harassment we would have no children.” [Telegraph (U.K.)]
This post over at our sister site, Dealbreaker, may remind you of some of your colleagues. It reminded us of a partner we once worked with — a brilliant litigator, with a photographic memory, but not the easiest person to interact with socially. Writes Bess Levin:
I’m sure it doesn’t come as a shock for me to point out that many of you are socially awkward, often fail to demonstrate empathy for your peers, and are prone to restricted patterns of behavior such as hitting the submit button over and over and over again when trying to comment.
Which is to say, you likely all have a mild to major form of Asperger syndrome. Or do you? Take this quiz and post your results.
The incidence of Asperger syndrome is probably higher among Dealbreaker’s Wall Street readership than it is among the more well-adjusted ATL crowd. But if you’d like to see where you fall on the scale, visit Dealbreaker, and take the test.
(It’s 50 questions long, so it takes a few minutes to complete, but it goes by faster than you’d expect. We scored a 6. Feel free to post your score in the comments.) What’s Wrong With You? [Dealbreaker]
Dominating today’s news cycle is the Treasury Department’s plan to reform the nation’s system of financial regulation. For some thoughts on the proposal, check out what John Carney has to say over at our sibling site, Dealbreaker (in posts here and here).
This regulatory reform proposal comes at a grim time for Wall Street, characterized by some as “the worst financial crisis since the 1930s.” It feels like we’re at the end of an era. Wall Street profits are sinking fast, venerable investment banks look endangered, and financial-sector layoffs could claim 20,000 more jobs in the next two years, in New York City alone.
This is generally viewed as bad news for Biglaw, considering how much large law firms depend on the financial services industry for work. But could it perhaps be a boon for lawyers, if their standing in the city’s financial pecking order falls at a slower rate than that of Wall Street Masters of the Universe?
A reader drew our attention to this interesting Sunday Times article:
The collapse of a major financial institution is usually an occasion for hand-wringing and tut-tutting over potential job losses, lower consumer spending and missed mortgage payments.
In New York City, it’s also seen as an opportunity. For many of the city’s middle class, especially those in the creative class, who have felt sidelined as the city seemed to become a high-priced playground for Wall Street bankers, the implosion of the brokerage house Bear Stearns raises a tantalizing possibility: participation in an economy they have been largely shut out of.
Wonders our tipster:
“Some New Yorkers seem to be looking forward to the collapse of Wall Street and their huge salaries in the hopes that prices deflate a bit. Does this return lawyers to the top of the financial food chain? Or do those huge partner salaries take a dive along with Wall Street?”
For some law firms and lawyers — e.g., those that are heavily dependent on securitization and structured finance work — the Wall Street retrenchment is definitely unwelcome. But for others, especially those focused on countercyclical practice areas like bankruptcy, the bust could be a boom.
Take a look back at this post, in which one Biglaw partner described the plight of lawyers in New York as follows:
“Face it, [lawyers] have no status. We go to these [elite private] school functions [for our kids], and this well-heeled group looks right through you. They won’t give you the time of day. You’re just one step ahead of the doorman.”
Inspired by the example of the generous Hamptons-based design firm which is now offering its stagings service at a discounted price to current/former/soon to be former Bear Stearns employees (staging is cleaning and prepping a house to be shown for sale), I have decided to offer a discount on sessions to all current/former/soon to be former Bear Stearns employees. The discount is equivalent to the current value of a share of Bear Stearns stock. That is to say, $2.
I approached this decision with some trepidation. You see, in my experience finance guys usually want things in their asses. I do not offer anal play on demand. Consequently the majority of my clients are lawyers.
Over at Dealbreaker, the commenters had some interesting reactions:
“One of the few times I’m actually glad I chose law instead of finance . . .”
“lawyers already take it up the ass on a daily basis from bankers, so they probably get their fill in the office.”
“so what? a chick’s tongue up there is a wondrous thing.”
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