The power brokers

Such is the complexity and global reach of the Western financial sector that no single person, institution or government can fully comprehend the current economic crisis. When it comes to those giving legal advice on the effects of the crisis, however, working out the winners is not nearly so difficult. The longer the crisis has gone on, the more power has been concentrated in the hands of an elite few law firms.

A chart in The New York Times on 7 October 2008 (see box ‘Key US power brokers’, page 46) identified the power brokers behind seven of the biggest transactions coming out of Wall Street as a result of the crisis, namely: American International Group (AIG), Bear Stearns, Freddie Mac and Fannie Mae, Lehman Brothers, Merrill Lynch, Wachovia and Washington Mutual. Unsurprisingly, Ben Bernanke, Chairman of the US Federal Reserve, and US Treasury Secretary Henry Paulson Jr and their teams topped the list with involvement in all seven deals. But next in line was Rodgin Cohen, a financial regulatory lawyer and chairman of Sullivan & Cromwell. Cohen was identified as a key adviser on six of the deals, having more influence than anyone outside government.

Other firms boasted their own power brokers. Cravath, Swaine & Moore; Davis Polk & Wardwell; and Paul, Weiss, Rifkind, Wharton & Garrison all had partners with central involvement in either two or three of the deals, as did Simpson Thacher & Bartlett; Wachtell, Lipton, Rosen & Katz; and Weil, Gotshal & Manges. Cahill Gordon & Reindel; Cadwalader Wickersham & Taft; Cleary Gottlieb Steen & Hamilton; Covington & Burling; and Skadden, Arps, Slate, Meagher & Flom were present on one of them.

With one exception (Covington), the list reads like a roll call of New York’s finest law firms, though this is exactly what you would expect in a financial emergency, according to Evan Chesler, presiding partner at Cravath. ‘The advisers that are showing up on these deals are all those you would expect to find in a crisis,’ he says. ‘There is a group of firms, which includes our own, that seems to have been most involved in the crisis day-to-day, and that is because we have the most expertise.’

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