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by Vault Law Editors | December 30, 2008

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As we stick a fork in 2008, what have we learned?  Obviously, any sort of “Top 5 Legal Industry Lessons of 2008” couldn't be but a mote in the great pitiless eye of our general meltdown, but Happy New Year anyway!

Lesson 5:

BigLaw is smallpotatoes

Turns out that perhaps the only thing “big” about BigLaw is its self-regard.  Back in the aftermath of Enron— that miniaturized simulacrum of Right Now—many asked “where were the lawyers?” Nobody’s asking that now. If anything, some wonder “what are the lawyers for, exactly?” Outside of the legal industry media, lawyers are being largely overlooked in the ongoing blame game. Ignoring the lawyers implies that they really weren’t really machers to begin with.

The crisis has produced one indisputable instant classic of traditional journalism: Michael Lewis' “The End of Wall Street's Boom?" In his 10,000 word story—told largely from the p.o.v. of a guy named Steve Eisman who anticipated the meltdown—Lewis makes only two trivial references to “the law,” and one of those only to mention how much Eisman hated being a corporate lawyer. A complementary piece, Henry Blodgett's “Why Wall Street Always Blows It,” analyzes the finance industry's generally delusional mindset. Beyond a passing mention of the SEC, Blodget doesn’t mention the law at all. In both these highly credible assessments, the lawyers were practically irrelevant.

Lawyers abound in the Bernie Madoff story, principally as useful dupes and unwitting facilitators of fraud. (See NY Times' recent exhaustive take.) From a ‘law-centric’ perspective, one striking aspect of the Madoff scandal is how it totally blots out L'Affaire Dreier. More-or-less a similar story, but on a different order of magnitude.  Remora is to Shark as BigLaw is to Wall Street. 

Lesson 4:

Ignore Lesson 5, BigLaw rules!

For example, here are a couple of Sidley Austin alumni:

And among the cabinet nominees: ex-Rose Law Firm (Arkansan BigLaw) for Secretary of State, ex- Covington & Burling for Attorney General, ex-Lewis & Roca for Homeland Security, ex-Alston & Bird for HHS…it’s a long list.

Fun Fact: Assuming all nominees are confirmed, it will be the first time since the first term of Richard Nixon (Duke Law ’37) that all four top executive branch jobs (President, VP, State & AG) are held by lawyers. (h/t: Kurt X. Metzmeier)

Lesson 3: 

Nobody knows anything

It’s what they say about Hollywood.  But look in the mirror,“law talking guy.” Despite all that ‘due diligence,’ with all those clueless first-years (and embittered contract attorneys) on doc review, still nobody saw this coming?* If hypocrisy is the tribute vice pays to virtue, then the ‘due diligence’ charade is BigLaw's compromise with unknowable. The late great Vonnegut wrote “History is merely a list of surprises … It can only prepare us to be surprised again.  Please write that down.” Seems we couldn't find a pencil and here we are.

Lesson 2:

Diversify.

Firms that over-leverage themselves in trendy specialty practices shall reap the whirlwind.  Will we never heed the lesson of the Dutch Tulip Bubble of 1624? Had they been around back then, Cadwalader, McKee Nelson, and Thacher Proffitt would most likely have been churning out the paperwork for tulip-backed securitizations.

Lesson 1:

Sic transit gloria mundi

Ye olde "Cravath model" is showing cracks and may be  unsustainable… "Bimodal" is becoming "Bicontinental" … stealth layoffs proliferate… compensation scales back …and, alas, Heller & Thelen, RIP.

finally: The Vault Law Blog “Man of the Year”:

Andre Royo as Bubbles









Congrats to Reginald “Bubbles” Cousins

-posted by brian

*Ok, maybe not quite “nobody.” In addition to Steve Eisman et al. (see Lewis article supra), Warren Buffett had warned years ago that the complex securities at the center of today's troubles were “financial weapons of mass destruction” and that we ought to be “beware of geeks bearing formulas.”  Ron Paul's economic advisor, Peter Shiff, was also right. Accurate prophecy makes strange bedfellows.

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