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October 20, 2009 2:37 PM

New Book Highlights S&C Lawyer's Central Role in Federal Bailout

Posted by Zach Lowe

RodginCohen It's not news that Sullivan & Cromwell's Rodge Cohen was among the handful of key players who determined the course of the federal bailout. 

In 2008, we named him Dealmaker of the Year because of his involvement in almost every key bailout deal, from helping AIG secure its initial $85 billion lifeline, to convincing Goldman Sachs to become to a bank-holding company and advising Lehman Brothers before it filed for bankruptcy. 

But a new book on the economic crisis by The New York Times' Andrew Ross Sorkin sheds more light on exactly how involved Cohen was with deals that went through, and those that didn't.  

Sorkin's book, Too Big to Fail, paints Cohen as an active participant rather than a reactive figure his clients called when they were ready to make a deal. Cohen prodded clients toward decisions he believed were healthy and was pitching deals along with Treasury and Fed officials to save tottering banks. 

During the summer of 2008, Cohen suggested to Lehman Brothers chief Richard Fuld that he turn Lehman into a bank-holding company--advice Cohen would repeat to Goldman Sachs head Lloyd Blankfein a few months later, according to this book excerpt reprinted in the NYT

While in Philadelphia for his niece's wedding, he reached out to Bank of America on Lehman's behalf to see if BofA had any interest in acquiring Lehman. (Cohen called a BofA dealmaker from the hospital after a relative fell ill at the wedding, the NYT excerpt says). 

Cohen initiated other big ideas, such as the one recounted in this excerpt reprinted in Vanity Fair. Sorkin describes a call Cohen made to Kevin Warsh, a governor at the Federal Reserve, on Sept. 19, 2008: 

"Warsh received a call from [Cohen], who was now advising both Wachovia on its talks with Morgan Stanley, and Goldman Sachs on its bank-holding-company status. He told Warsh he had an idea--a potentially big one. It wasn't an officially sanctioned plan by his clients, just a friendly suggestion from an old-timer in the business. He suggested to Warsh that the government attempt a shotgun wedding between Goldman and Wachovia." 

Over the next few days, regulators tried hard to make that deal work, with Cohen representing both Wachovia (and the bank's CEO, Robert Steel) and Goldman. Writes Sorkin: "Meanwhile, Steel's lawyer, Rodgin Cohen, was also Goldman's lawyer. It had all become so confusing and rife with conflicts."

That deal fell apart, but Cohen found Wachovia a new takeover partner: Wells Fargo

So it appears that Cohen, a deal lawyer who usually remains behind the scenes, has emerged as one of the stars of Sorkin's book. Interesting times, indeed.

Photo by Paul Godwin

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Cohen is big, but Herlihy is bigger. Herlihy shows up on Paulson's phone logs that Sorkin got a hold of while doing his research. Herlihy received a call on Sept. 17 from old Henry. I guess to congratulate Herlihy on greasing the wheels for the Merrill merger. Too bad the story on that one is not going to redound to Wachtell's benefit.

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