Folks of my generation will no doubt remember the Peter Principle, first propounded by Dr. Laurence J. Peter and Raymond Hull in their book of the same name. Peter and Hull proposed that in any hierarchical organization, a person tends to rise to his or her level of incompetence. This principle has long since been disproved, since one of its tenets was that once a person rose to their level of incompetence, they remained there. Consider George W. Bush, who rose several levels past his level of competence. Indeed, it is not at all clear that he ever held a position in which he displayed the slightest competence.
But, one could argue that he is a special case.
This is all by way of introducing yet another proof that the principle is dead in our modern era, and I’m not talking about Bill Kristol, for whom there is also no discernible record of competence at any level. No, this one strikes a little closer to home, in that it involves the lawyer business, in which I have the misfortune to be engaged. It seems that a long lived Wall Street Law Firm, Thacher, Profitt & Wood, is about to go under. It tried to sell itself, but couldn’t. But have no fear, some of the partners, at least, have found a new home:
Thacher’s partners had been in talks to sell the firm. But [Sonnenschein, Nath & Rosenthal], based in Chicago, is not acquiring Thacher, choosing instead to take on the lawyers who formed the core of its real estate, finance and corporate practices.
Thacher was founded in 1848, and its clients included many of the biggest banks and investment banks, including Citigroup and UBS. It has been one of the leading firms behind the creation of the sort of mortgage-backed securities that fueled the lending spree that has since backfired on the banks.
So the guys who helped create the mess that has led to the destruction of the national economy are getting a soft landing while the rest of the firm is still faced with uncertainty. It gets even better. Guess who will be getting the benefit of legal advice from these folks who helped create the mess in which we find ourselves:
… [T]he Treasury Department recently awarded Thacher a $500,000 contract to advise on investments as part of the federal bailout, the Troubled Asset Relief Program. Mr. McCarthy said that the lawyers involved with that assignment would be joining Sonnenschein and expected to retain the Treasury as a client.
Who better to advise us on these investments than the very guys who helped create them?
Now, my heart’s not really bleeding for the folks left behind at the rump Thachers. During the good times they, at least the partners, no doubt shared in the fees generated by the creation of these toxic instruments, and most of them will probably find work elsewhere. Still, it is emblematic of our times that the lawyers considered the cream of the firm were those who created “the sort of mortgage-backed securities that fueled the lending spree that has since backfired on the banks”.
Post a Comment