here - Sullivan & Cromwell

EXCLUSIVE
Wall Street’s fireman
In the first part of an exclusive two part interview with Banker
Middle East, Rodgin Cohen, the legendary lawyer who was a key
figure during the events of 2008 that saw the collapse of Lehman
Brothers and the near collapse of capitalism, looks back at the
events that saw some of Wall Street’s biggest names nearly ‘go to
the wall’ and gives Mike Gallagher his views on sovereign wealth
funds and international regulation
H
Rodgin Cohen (the H
is for Henry) is quite
possibly the single most
powerful lawyer on
Wall Street. His hugely
influential role in the 2008 banking
crisis was chronicled in Andrew Ross
Sorkin’s heart-stopping fly on the
wall account (Too Big To Fail) which
documented what some say was
capitalism’s darkest hour.
The New York Times memorably called him ‘The Trauma Surgeon of Wall
Street’, although Cohen, in his typically self-effacing, low key style says he was
more like “one of the scrub room nurses.”
In March 2010, Cohen was named one of the ‘Decade’s Most Influential
Lawyers’ by The National Law Journal. The publication noted that he has been “a
superstar in the legal industry for years.”
Cohen is a partner at Sullivan & Cromwell (S&C). He was Chairman of the
firm from 1 July 2000 through 31 December 2009 and has served as its Senior
Chairman since 1 January 2010.
The primary focus of Cohen’s practice is acquisition, corporate governance,
regulatory and securities law matters for major US and non-US banking and
other financial institutions and their trade associations. S&C’s reach means it does
business everywhere from Beijing to Frankfurt, Hong Kong, London, Los Angeles,
New York, Paris, Sydney, Tokyo and Washington DC.
In the acquisitions area, Cohen has been engaged in most of the major bank
acquisitions in the US including Wells Fargo-Wachovia, BlackRock-Barclays
Global Investors, Mitsubishi UFG-Morgan Stanley, Barclays-Lehman, Allianz-
Dresdner, UBS-PaineWebber and Credit Suisse-First Boston, to name but a few. If
it is a really big deal (or borderline catastrophe), then there is a good chance the
low key lawyer will have been present.
Cohen (Rodge to his friends) has worked on a significant number of major
cross-industry and private equity acquisitions, including JPMorgan Chase-Bear
Stearns, Merrill Lynch-BlackRock and JC Flowers-Sallie Mae.
He has worked on a wide variety of bank regulatory matters with the four
banking regulatory agencies, as well as other governmental agencies, on behalf of
many of the largest US and non-US financial institutions, and trade associations.
These matters have included the TARP and liability guarantee programmes.
Cityfile New York, in its list of New York’s ‘2,144 most notable’ observes that Cohen
oversees more than 600 lawyers at S&C’s 12 offices and says “it remains the gold
standard” when it comes to M&A. Some of the all-star attorneys with whom Cohen
works closely include Ben Stapleton, David Harms, Bob Giuffra, John Bostelman,
Vince DiBlasi, Karen Patton Seymour, and M&A Group Head Jim Morphy.
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Reprinted with permission of CPI Financial, Banker Middle East and Mike Gallagher.

EXCLUSIVE
Wachtell, Lipton, Rosen & Katz Co-Chair Ed Herlihy, another key player in the
events of September 2008, is widely seen as Cohen’s big Wall Street intellectual
rival and a report in Fortune magazine pointed out that both men went “head-tohead
in 18 of the 25 major bank mergers during the ‘90s.”
Both men seemed to be everywhere at once during the dark days of September
2008 and in the same month The Deal was quick to make a note of the comings
and goings of the two firemen.
“Every time I looked up, it seemed like Rodge was in the room,” said Henry
(Hank) Paulson, the former Treasury secretary.
“If you need any more proof that H. Rodgin Cohen and Edward Herlihy are
the country’s leading banking M&A lawyers, look no further than this month’s
financial services firestorm. The two attorneys have been almost as ubiquitous as
Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson in
the recent shotgun weddings, collapses and bailouts that are reshaping the sector,”
The Deal said in September 2008.
Herlihy and his team were flat out trying to save Fannie Mae, Freddie Mac
and AIG, while simultaneously advising Bank of America on whether it was wise
to spend $50 billion on a rapidly weakening Merrill Lynch (something its team
managed to sort out in less than a day) and almost immediately after that helped
Morgan Stanley in its negotiations with Mitsubishi UFJ Financial Group.
At the same scary time, Cohen was leading a strike force around Wall Street
in a race against the clock to shore
up Fannie Mae, Lehman Brothers and
advise Barclays in its dealings on a
rapidly ailing Lehman. He also managed
to find time to advise JPMorgan in its
Government-brokered acquisition of
Washington Mutual.
Cohen was there when Wachovia
was sold to Wells Fargo, and he was also
instrumental in helping to turn Goldman
Sachs into a bank holding company.
Tim Geithner and Hank Paulson “By our count--he has lost track-
-he advised on at least 17 global
credit crisis-related mergers, bailouts, and cash infusions in 2008. He was in the
room when Bear Stearns was sold, when Fannie Mae was nationalised, and when
Lehman Brothers died,” Ben Hallman, writing in The American Lawyer said.
Cohen, who was one of a small group of people who somehow managed to
save capitalism during its darkest days since October 1929, surprisingly comes
across as being low key and is actually quite affable for someone who must have
felt the weight of those momentous times. He admits that he felt the pressure of
the hour during those frantic days as many of the biggest names in banking faced
oblivion and the world looked on nervously.
“Oh, absolutely,” he said. “One of the biggest dangers we will forget (memories
will dim), is how close we were to the edge of the precipice. Had it gone over,
had that happened, there would have been a financial calamity and an economic
calamity. If you look at the 1930s as a model/precedent, there could have been
major social and political dislocation.
“It was, at the risk of exaggeration, the most serious situation I have seen, and
there have been a number of them
over the past four years, but they were
nothing like this.”
But for all the pressure and
stress of those grim days, Cohen
does not believe it was quite as
apocalyptic as it seemed to many
others. He dismisses the ‘darkest
hour’ suggestions and is, if anything,
given to playing down his role in the
tumultuous events.
“I’m not sure it was capitalism’s
darkest hour. It was the financial
system’s darkest hour, at least since the
1930s and there clearly was trauma.”
Cohen and his team, which must
have been working around the
clock, frenetically racing from the
headquarters of one bank to another,
with visits to the offices of the New
York Fed in between (where Tim
Geithner and Hank Paulson were
hammering out rescue plans) were
probably putting in the same painful
hours as junior doctors. However
Cohen in his unassuming way instead
cracks jokes about his New York Times
nickname-‘The Trauma Surgeon of
Wall Street.’
“At the risk of being inappropriately
modest, but I think more accurate,
I think I was more like one of the
scrub room nurses, whereas the real
surgeons were Paulson and Geithner
and Bernanke.”
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What was the toughest part?
“I think the most critical aspect was
that so much was coming at the policy
makers and regulators at once,” he said
from his office in New York, which
rather handily sits nearby that of one
of his clients, Goldman Sachs, on 125
Broad Street.
“There was no game book. No one
had a plan ahead of time for any of these
institutions, much less full financial
contagion. It was the cumulative impact.
I think you could have handled any one
of these, but what you couldn’t handle
was the whole facade cracking and
everybody being at risk.”
Cohen is well used to being thrown
in at the deep end of unprecedented
situations (he was instrumental during
the Iran hostage crisis in 1980 in helping
to free US captives) and if lawyers of
his ilk are anything to go by, probably
enjoys tackling the kinds of emergencies
that would give most politicians and
central bankers a heart attack.
He even advises sovereign wealth
funds (SWFs) in their delicate and
extremely low key business dealings.
Cohen praises the funds for their
sophistication and once again, as is
part of this character, plays down his
role in his dealings with them.
He is quick to acknowledge the
SWF’s canny, long-term investor
attitude. Some Western bankers have
come to the SWF table with promises
of all kinds of advice and suggestions of which kinds of products make the best
investment, but Cohen cautions otherwise.
“The sovereign wealth funds generally have people who are very sophisticated
in financial terms. They do not need advice at all, certainly not on how to handle
financial transactions. They come to us for what I call ‘deal technology.’ How do
you structure a deal to make the most sense and they come to us in particular
because the US regulatory system is very complex, difficult to navigate.
“There is often as much lore as there is law and they want to know how to deal
with the US regulatory system; how you structure a transaction and so on. If you need
approval, how do you go about getting it?”
He is also quick to praise the move towards greater transparency that people
like Hank Paulson, during a trip to Abu Dhabi in 2008 pondered on. “As economies
change, uncertainty can create resistance to openness. It is critical to understand,
however that in the long run openness to trade and investment will not only bring
prosperity, but will also improve stability by better enabling economies to manage
external shocks and smooth out business cycles,” Paulson said at the time.
At the same time, while recognising that some funds may have been stung by
investments that are now worth less than when they acquired the stakes, Cohen, who
has probably seen (and dealt with) more crises than most politicians have had hot
dinners, in his nearly 40 years in the business, takes the historic view in such matters.
I think I was more like one of the scrub
room nurses, whereas the real surgeons
were Paulson and Geithner and Bernanke.
“I think there has been a push, which to a significant extent has been successful,
in more transparency coming from the sovereign wealth funds,” Cohen opined.
“They certainly had losses, but some of these sovereign wealth funds, at least
the ones that I am closest to, exemplified that famous story when Henry Kissinger
met Zhou Enlai and asked him what he thought had been the impact of the French
Revolution and Zhou Enlai said it was “too early to tell.”
“These sovereign wealth funds are very long term investors. The answer to
their success can’t be measured now - 2014/2015 is the time to look. Nobody can
time the bottom precisely.”
But a lot of people think that Warren Buffet tends to time the bottom
better than many other people.
“Yeah, but even Buffet makes mistakes from time to time. Of course, there is a
question as to whether Buffet is human anyway,” Cohen says, laughing.
When asked if any many Middle Eastern banks come to him for advice, Cohen
admits that they haven’t, “and I am not surprised at that because at the end I think
that regulatory systems differ, cultures differ and what makes sense for the United
States may, or may not make sense for anyone anywhere else in the world.”
In the next edition of Banker Middle East, two years on from the grim days of
September 2008, Rodgin Cohen talks about whether Lehman should have been allowed
to fall, his views on M&A and MAC clauses and offers the readers of Banker Middle East
a few suggestions on what can be done to create a stronger global banking system. •
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