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Are Obama’s Bank Reform Proposals Good News for Lawyers?

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  • Are Obama’s Bank Reform Proposals Good News for Lawyers?

    The stock market sure didn’t respond well to President Obama’s calls on Thursday to regulate the size and activities of the nation’s largest banks. (The Dow Jones was down over 213 points).

    But how did lawyers respond? From what we’ve seen so far, it was a mixed bag. Allen & Overy’s Doug Landy, the head of the firms’ U.S. bank regulatory practice, isn’t a fan.

    In an email to the Law Blog, Landy wrote:
    The Obama proposal on limiting bank size and principal activities is a troubling concept that is neither supported by the evidence of the causes of the credit crisis nor well designed to prevent future systemic risk issues. If either being a large bank, or engaging in agency and principal activities in the same entity, were so inherently risky as to require banishment, every European bank would be collapsing as we speak.

    Fair enough. But will the move bring work for lawyers? It seems likely. After all, regulatory overhauls send industry brass running for legal advice. And that, of course, helps lawyers. According to this story out Friday in Lawyer, Obama’s plans have banking and regulatory lawyers gearing up for a flood of work.

    According to the Lawyer, potential changes include placing a limit on the size of banks and preventing deposit-taking banks from “owning, investing in or sponsoring” hedge funds or private equity groups.

    Clifford Chance banking regulation partner Chris Bates said the news could re-shape the banking landscape.

    “Banks in five years’ time will not look like they do now,” he said. “What’s clear is that they won’t be structured as they used to be, and if they do have to restructure it’ll mean a large amount of work for lawyers.”

    As far as what the work will look like, Bates was circumspect. For now. “The striking thing is how little detail there is around the proposal. A liability cap is interesting, but the thing is what level they set the cap at.”

    Another London lawyer with experience advising on banking restructuring agreed that the final terms of any legislation might not be as wide ranging or as harsh as the initial proposals suggest.

    “If I was a betting man I would go out and buy bank shares,” he said. “The proposals could be read in a number of different ways and some are quite narrow.”

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