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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.” 26 JULY - AUGUST 2010 www.cpifinancial.net
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. • www.cpifinancial.net JULY - AUGUST 2010 27
Page 1: EXCLUSIVE Wall Street’s fireman I

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