4. Lee Meyerson, Simpson Thacher & Bartlett
TARP Program
The American Lawyer
By Ben Hallman
April 01, 2009
More than 100 deal trophies crowd Lee Meyerson's windowsill like rush hour commuters at nearby Grand Central Station. They are the visible evidence of a 27-year career as a top bank lawyer, each figurine celebrating a notable bank merger or acquisition. Except that these days, with many of Meyerson's biggest clients either defunct or in trouble, the trophies look more like little tombstones. Washington Mutual, Inc. (seized by federal regulators) and Wachovia Corporation (facing collapse, bought by Wells Fargo & Company) are well represented, as is Lehman Brothers Holdings Inc. (died in September) and Sovereign Bank (bought by Banco Santander, S.A.).
Meyerson worked on $50 billion worth of recapitalizations for banks in 2008, as well as on the fire sale of Lehman Brothers's brokerage to Barclays Bank plc, but it is a sign of the times that his biggest representation of the year--and perhaps of his entire career--wasn't for a bank at all. Last fall, during the darkest days of the financial crisis to date, he worked for the U.S. Department of the Treasury on crafting the framework for the Troubled Asset Relief Program (TARP), the biggest government bank bailout in United States history. For this deal, there will be no trophy.
It happened fast. On October 3 Congress approved a $700 billion bailout of the American financial system. The plan, which had initially been geared toward buying up toxic securities, quickly evolved into a mechanism for the government to purchase direct equity in banks. On October 8 the Treasury Department asked six major law firms to submit bids to work on a plan to make the capital injections. Two days later, a Friday, Treasury tapped Simpson Thacher. "I'm the head of the financial institutions practice, I've been here for 27 years, and this is all I've ever done," Meyerson says when asked what qualifications he put forward in the bid. It also likely helped that his firm had represented the Federal Reserve Board when it extended $28 billion to JPMorgan Chase & Co. to fund its acquisition of The Bear Stearns Companies Inc.
Once Simpson Thacher was on board, the work was intense. The immediate challenge, Meyerson says, was to create an "unprecedented investment template"-a standardized term sheet that could be used by any of the nation's 8,500 banks to apply for a government loan. A one-size-fits-all model was necessary, he says: "There was no way, in the time frame that Treasury wanted, to have teams of lawyers negotiate a unique agreement and set of documents with every single bank."
The documentation had to be broad enough to work for banks headquartered in different states, and for banks operating under different capital structures. It also had to meet what Meyerson calls the "commercially reasonable" test: "It was supposed to be a program [that was] broadly accessible. The point was to get money out into banks."
Like the other dealmakers involved in the bailout, Meyerson worked against the backdrop of such dire financial news that he sometimes wondered if he was feeling what bankers felt at the start of the Great Depression. "Every day, things you could have never imagined were happening around you," he says.
After a long weekend, the basic language of a six-page term sheet was set. Then-Treasury secretary Henry Paulson summoned the heads of nine major banks, including JPMorgan Chase; The Goldman Sachs Group, Inc.; and Citigroup Inc. to Washington, D.C. Paulson told the bankers in no uncertain terms that he expected them to participate. On October 14 the Treasury Department announced that the program had gone into effect, initially agreeing to capital infusions totaling $250 billion industrywide.
The work wasn't done for Meyerson-he helped the Treasury Department flesh out the term sheets into full-length 75-page deal documents for several dozen banks. He also represented Treasury when it pumped additional billions more into Citigroup and Bank of America Corporation. (Simpson Thacher billed about $300,000, or an average of $80 per hour for the work-a hefty discount from its usual corporate rates.)
Meyerson's work for Treasury has continued into the new year, and under a new regime, as TARP has morphed into CAP, the Capital Assistance Plan. Most recently, he represented Treasury when it agreed to convert up to $25 billion of its preferred stock investment in Citigroup into common stock, giving taxpayers a bigger stake in the troubled bank.
The deal trophies are gathering dust. His biggest client now is the U.S. taxpayer.
See all 25 of our Dealmakers of the Year, from the April 2009 issue of The American Lawyer.
