There is plenty of blame to go around for the financial crisis. Borrowers who sought to live far above their means, and buy homes that they could not reasonably afford, are at fault. Regulators and government officials should have done a better job of ensuring that financial institutions didn’t take excessive lending and trading risks, and that mortgage lenders did not engage in inappropriate lending practices. And several financial institutions experienced risk management fail, in their blind rush to maximize profits.

With regards to the third leg of this triangle of responsibility, President Obama’s proposal to institute a tax on certain assets of financial institutions with more than $50 million in total assets represents an attempt to ensure that taxpayer bailout funds are fully recovered from financial institutions that took excessive risks — and what better way to accomplish that then to require the assistance of those institutions that benefited the most from the bailouts.

Some will make the argument that certain institutions were relieved of their obligations to the taxpayer once they repaid the bailout funds that they themselves received. However, at a time when Goldman Sachs recently paid 953 of its employees more than $1 million in compensation, several months after accepting $10 billion in bailout funds — and when Merrill Lynch paid 696 of its employees similar amounts, months after also receiving a $10 billion present — such arguments may have difficulty obtaining much sympathy on Main Street, especially when these banks might not have been in any position to pay this compensation to begin with, had they not been restored to health by the American taxpayer.

The American people shouldn’t be left to suffer and clean up the mess to which Wall Street played a major role in contributing. We need to hold Wall Street accountable for its share of the mess. If Congress approves the President’s tax, perhaps financial institutions will give more careful consideration, going forward, to the downside of making reckless decisions with regards to risk management, and will be extremely hesitant to put themselves in a position where taxpayer dollars are needed to save them. No one should begrudge the right of Wall Street bankers to enjoy fat profits whenever they make good decisions; but in turn, like good capitalists, they need to pay a price whenever they experience epic fail.

Massachusetts Senator-elect Scott Brown’s victory on Tuesday over Martha Coakley suggests three important lessons for political candidates, and federal officeholders seeking re-election:

First, the most important word in 2010 for federal candidates is going to be accountability. Your pedigree won’t matter to much to voters, and no seat is “safe.” Voters want to know who you are, what you have done, and what you are going to do, going forward, to address their concerns. Candidates who don’t actively and effectively communicate these things are going to be trouble. When you’re a politician, voters are your clients. You take them for granted at your own risk. You can’t afford to be out-hustled on client service, and that’s where Coakley fell short.

Second, as important as health care reform is, in this political environment, the correct mantra for politicians to repeat continues to be “it’s the economy, stupid.” Politicians need to correctly diagnose and address voters’ immediate concerns about their finances before moving on to other concerns.

Third, no one has any clue about what’s going to happen in November. Raise your hand if you knew who Scott Brown was a year ago. However, whatever you may think of Scott Brown and his politics, the fact is, he knew who he was and what he stood for — and he did a great job of communicating that to Massachusetts voters. The lesson here is, persistence and passionate belief in a cause can overcome great odds to achieve an effective result. I can certainly relate to that, and to all of these lessons, as an attorney.

I appear in court regularly on my cases, and it is fascinating and frightening to see how the economic crisis is affecting the court system.

Not only are the courts furloughed due to lack of funds to run them, but also, I heard a rumor that LA County is going to lose 111 judges to layoffs, and that only criminal cases are going to continue to get priority. This is going to collide with the law that requires civil cases to be tried within a year of the filing date of the complaint.

More importantly, the remaining civil judges are going to have to absorb the caseloads of the laid-off judges. I wonder how they are going to do it. Judges are already extremely overworked. You can feel them struggling to handle their caseloads and to unload cases. They pressure the lawyers to resolve disputes outside of the courtrooms, and pressure the parties to pay to have private judges decide them.

I appeared at a post-mediation status conference the other day. This is a court hearing where the judge requires all of the lawyers to appear and report the outcome of a mediation. In my case, the parties did not settle their dispute at the mediation, though they spent nine hours and thousands of dollars — between the mediator’s time and the lawyers’ time — trying.

The first thing the judge stated on the record when she saw five lawyers approach the counsel table as she called the case was, “What are you all doing here? How can these parties afford so many lawyers on this type of a case?” One of the lawyers, who appeared by telephone, then made several inflammatory accusations against my clients. The judge ignored these comments and asked her very simple, direct questions about the outcome of the mediation. The lawyer answered with non-responsive, inflammatory accusations.

The judge angrily castigated this lawyer for not “being reasonable or helpful,” and lectured that as an attorney, the lawyer’s role was to help resolve problems rather than make matters worse with such tactics. I have never seen a judge react like this. A month previously, a judge on another case yelled at the lawyers who were in chambers preparing for trial — exclaiming that by doing so, we were simply “rearranging the deck chairs on the Titanic.” He told us that instead, we needed to put our energies into settling the case. This judge made clear his belief that aggressive tactics have no place in a log-jammed courtroom.

There is even less tolerance now for tactics that used to be considered good old-fashioned advocacy. Tactics that used to be considered the norm are by necessity falling by the wayside. The court system was overly congested before, and now, it is going to get much worse. It can not help but profoundly affect the way we advocate for our clients. As a pragmatist, I think that in many situations, this is a good thing. Too often, too much money is wasted fighting over frivolous issues. I agree with Abraham Lincoln, who said: “As a peacemaker the lawyer has a superior opportunity of being a good [wo]man. There will still be business enough.”

We are moving towards a new civility.

In America today, there are almost as many people making their living as bloggers as there are lawyers. Already more Americans are making their primary income from posting their opinions than Americans working as computer programmers or firefighters….
The best studies we can find say we are a nation of over 20 million bloggers, with 1.7 million profiting from the work, and 452,000 of those using blogging as their primary source of income. That’s almost 2 million Americans getting paid by the word, the post, or the click — whether on their site or someone else’s.

http://online.wsj.com/article/SB124026415808636575.html

In yesterday’s Wall Street Journal’s Law Blog, Elizabeth Wurtzel examines how over-worked and over-paid corporate lawyers enabled the Wall Street bankers, and thereby  co-created the current financial crises.  Her observations are below, and I couldn’t agree more.

Millions of hours of manpower put in by investment bankers on Wall Street and the lawyers who enabled them — the kind that brought home those bright shiny bonuses that are now causing a populist uprising in the hinterlands — have been wasted away by what is kindly called the credit crisis. . . .

[T]he traditional life of a law lackey . . . has meant virtual residence at the firm. Meals were delivered by Seamless Web and the roll-top desk was used for catnaps, because whatever it is that had to happen had to happen immediately, or yesterday. The emergency-room atmosphere that permeated the processing of derivatives deals, corporate takeovers, and whatever else has been going on at Goldman, Bear, Citi and Merrill for the past decade, could rival that of an operating room during open-heart surgery. Only, of course, it was a matter of money — not life or death.

Perhaps money and mortality are all the same to some. But as a way of making the former, this hysterical ER-approach has proved futile. All those lost nights of sleep are now lost 401(k)s. So what was the point? Corporate lawyers could have been sunning in St. Bart’s and ended up with the exact same result, plus a tan.

. . . I don’t believe any of the major players are re-evaluating their ethos — only their decision to invest in subprime mortgages. And this is foolish, since the problem is not just that the financial instruments were bad bets, but that the corporate structure and the feverish rush of it all are fundamentally flawed.

I would love to call the system despicable or detestable or something evil-sounding, but that would be giving it too much credit. It’s really just the march of dunces.

I would add that in order to prevent this type of phenomenon from recurring, many lawyers need to step outside their air-conditioned skyscrapers and experience a bit of more of “real life” before they mindlessly mastermind the next financial-or-whatever apocalypse.

Everyday I get telephone calls from people who are desperate and confused and looking for help.  They are afraid they are losing their homes.  They have mortgages they cannot afford.  They had no idea what they were getting into a few years back when the market was “hot” and they purchased or refinanced their home; they had no idea that the rates would adjust and that they would have to make payments that are double and triple the amount of their initial payment.  And, they have no idea today how they are going to pay their mortgages.

Many of these people are not the kind who refinanced and purchased Escalades or trips to Hawaii.  The story is well known by now.  They faced illness and used the money for unanticipated medical expenses, or they used the money to defray expenses after they lost their jobs, or they suffered a divorce or death in the family and now they simply can not afford to pay the mortgage any more.  For example:  a couple in their 70’s who are now retired and living on fixed incomes (social security and a modest savings) recently saw their mortgage payment triple.  Now that the market has crashed and they are upside down with payments they can’t afford, they are faced with losing all they worked for their entire lives, and, at the tender age of 75, homelessness.

What’s disgusting is to see the same culprits who got them into this mess in the first place (the unscrupulous real estate agents and mortgage brokers), switching hats and scheming and dealing to take advantage of them on the way down.  That’s usually where I come in.  I’m suddenly involved in helping people deal with the-people-who-are-trying-to-help-gone-bad.  If you had asked me if I ever thought I would be doing this work a few years back, I would have never believed you.  But this is one way that I find the practice of law to be extremely gratifying.

A few years ago, when Pacific Street Films enlisted my aid in producing “Follow the Money,” I was surprised to discover learn about this story before it broke and became national news.  It was a hard sell getting people to invest in the making of a documentary which was ahead of what merely 6 months later turned out to be a huge curve.