See abstract below. Full transcript available for download here.
Sheldon Goldfarb, General Counsel for the Americas for Royal Bank of Scotland, addressed the roles played by lawyers in the financial crisis and the legal lessons learned from that crisis. As opposed to many commentators, who were only able to approach the crisis in hindsight and through the lens of academia, Golfarb spoke as someone with firsthand knowledge of the fateful circumstances surrounding the crisis: “I come at this topic not from the dispassionate place of an academic, but from the standpoint of someone who was at the center of the storm. I was the general counsel of a financial institution that was a very major player in the mortgage-backed securitization markets.”
Goldfarb, because of his internal knowledge of the institutions involved in the crisis, is well aware of the commentary that compares the conduct of certain banks to disgraced companies Enron and WorldCom. However, he raises the excellent point that, due to attorney-client privilege, there is no way of knowing how many lawyers saw the crisis coming, or even objected to the circumstances that led to it. “I think it’s a fair question to ask where the lawyers were, but … I think that comparisons to Enron, WorldCom and the like are misplaced,” says Goldfarb.
This immediately begs the question, “Where then, does the blame lie?” a question that Goldfarb was happy to answer: “The regulatory community deserves some blame for lacking the will to regulate the more risky products and practices of firms and thereby failing to prevent the race to the bottom. Of course, accountants deserve some blame. They always seem to. Finally, of course, the lawyers.” In order to explain the role of the lawyers, Goldfarb invokes the character of the “fearless advocate,” the role he says law schools prepare their students for and we have come to know from movies and TV. The role of these advocates, according to Goldfarb is not to judge the societal implications of his case but rather to provide the best possible counsel to their clients. Put simply, “It is unrealistic to expect lawyers to “be distinctly more virtuous than the corporate management by which they are employed.”
Another role that such lawyers might be expected to play is that of gatekeeper, especially in larger financial institutions. The danger in this is that certain lawyers become too comfortable in a gatekeeper position and are unwilling to take up a key management position.
So, the roles of lawyers in the financial crisis are impossible to gauge on any quantitative level, since the impact of lawyers on a company is known only to the lawyers and the companies themselves. “I once saw the different roles of lawyers as stages, with the enlightened lawyer moving from fearless advocate to gatekeeper to the nirvana stage of statesman,” says Goldfarb. But he now realizes that a good lawyer has to be a combination of all three, especially in a media climate that is hostile to corporations.