If You Can't Join Them, Beat Them

The Washington Post recently ran a story about the law firm of Quinn Emanuel Urquhart & Sullivan, which decided, before the current financial crisis hit, that the competition they faced for the work of banks was too stiff. They decided to make their money by suing banks, and the bigger the bank, the better they liked it. As a result of the hot water many of the nation's biggest banks find themselves in these days, the law firm's busier than a one-armed paper hanger. This month, Quinn Emanuel filed more than a dozen of the 17 lawsuits that federal regulators brought against foreign and domestic banks, claiming they had sold nearly $200 billion in fraudulent mortgage investments to housing giants Fannie Mae and Freddie Mac. The fact that Quinn Emanuel represents giants like Fannie and Freddie indicates that it has definitely barked up the right tree. The US taxpayer is ultimately footing those legal fees and with the phalanxes of trial lawyers that the defendants can employ to slash and burn the legal landscape and prolong the agony for both sides, billable hours will be flying as fast as one of those Riverdance cloggers in "full-tilt-boogy" mode. I feel for the legions of paralegals and first-year associates, armed with bates stamps, toiling away in conference rooms and less savory venues at their Sisyphean task of numbering every piece of paper ever produced by the dead trees of northwest Oregon. On the other hand, in this world we like to call "Litigation Land," there are field hands and there are overlords, and you've got to toil in the fields for years before you get a chance to lunch in the Big House. And it's not just the plaintiffs' law firms that will benefit. No, big bank defendants will be shelling out mucho dinero to their law firms, as well. Lawyers for plaintiffs and defendants alike are benefiting from the increasingly litigious fights between investors and Wall Street firms over the shoddy mortgage-backed securities that fueled the housing boom and exacerbated the bust that followed. At this point, no one knows how many villas in the south of France will be funded with the fees generated by all of this litigation. On the other hand, no one expects that the ultimate amounts spent on lawyers will be small. It's unclear how much the outside firms working on the FHFA suits stand to make from the cases and how much taxpayers will be charged for the work. The FHFA declined to comment for this article, and lawyers at Quinn Emanuel declined to discuss particulars of their work with the government. What is certain is that Fannie and Freddie have made a lot of money for many lawyers since the government seized the mortgage giants three years ago to prevent them from failing. As of earlier this year, the two mortgage finance companies had spent $160 million to defend themselves and their former executives in lawsuits and $50 million on foreclosure lawyers now under investigation in Florida. Sure, you could be depressed about how, three years after Aunt Fannie and Uncle Freddie had to be "put in a home," those two black holes of taxpayer losses continue to emit the giant sucking sound that Ross Perot once ascribed to NAFTA, but you have to look on the bright side of this disaster: trial lawyers are making a bundle no matter who foots the tab.

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