A few weeks ago I posed the
question to you all: Will the realignment of the top financial
services institutions fundamentally alter the long-term demand for legal services?
Here’s how you voted:
A couple of aspects of these seem worth commentary:
- There seems near unanimity that, regardless of what happens on Presidential
election day in the US this November, we are in for a more regulated world. - And there is near equal consensus in the short run that it will require
more lawyers to sort things out. - Likewise, the era of 20:1, 30:1, or 40:1 investment bank balance sheets
(in terms of assets:equity ratios) seems at an end, perhaps for a long long
time. - And securitization—at least in terms of standard "assembly line"
deals—is over.
What can you read between the lines, as it were?
I read massive uncertainty and doubt.
Partly that’s from the popularity of the rather cheeky "What do I care? I’m
a litigator!" After all, when one is nervous, flippancy is
a familiar mask to don.
But also I infer it from the lowest-single ranking
selection, seeing no fundamental change in demand "because the ‘primary’ demand"
comes from the underlying corporate economy, not Wall Street. That this
option was uniquely unpopular—only 12 votes out of 272, or a mere 4.4%. In
other words, it sure sounds as though the financial services industry is the
lifeblood of much of what we’ve been doing recently.
Which brings to the fore the only question that really matters in terms of
getting our financial system back on its feet: When will "credit"
return? The English word "credit" traces its etymology to the Latin credere,
meaning "to believe," and has cognate forms in, among other things, creed,
crediblity, credence, and credulity. Note that neither "assets" nor "liabilities"
is a cognate for credit. Credit is all about belief.
Until fundamental belief in the "credit-worthiness" (for which one could almost
substitute "worthiness" without loss of meaning) of financial institutions
returns, we will not be able to count ourselves out of the woods.
At this point the only question is how much more massive the federal government’s
intervention will have to be. That, at least, is the question for Presidential candidates, policy-makers, bankers, Wall Street and Main Street, not to mention any corporation that goes to the commercial paper marketplace and any family that’s in the market for a mortgage, a car or student loan, or a new credit card.
For you, the question is when your firm can emerge from this, and how best to position it to do so:
- In strategically important and solid relationships with your clients
- With practice groups best aligned to how you see the new emerging landscape
- With expenses under tight control and the opportunity to prune deadwood fully exploited
- And to do all the above with alacrity.
