The financial crisis of 2008 looms large. It had a tremendous impact on the political and business landscape, and touched every American in some way or another. For most of us, sitting on the outside and watching things fall apart, the lead-up to the crisis and its aftermath were somewhat remote. But James Odell, now a partner at Blank Rome LLP had a front row seat for these events, as he held high-ranking positions in the legal departments of various large international banks during the collapse. Odell recently spoke with InsideCounsel to discuss the changes he has seen in the regulatory landscape over the past 14 years.
In the early years of the 21st century, Odell was Global General Counsel of Investment Banking for Citigroup, and he saw before him a bit of a regulatory void. “What characterized 2001-2005,” he says, “was that other regulators and law enforcement folks were stepping into a vacuum. State attorneys general were ramping up their focus, really for the first time, and we were dealing with people outside of normal regulatory relationships.”
These new players, says Odell, made matters trickier. “Initially, the relationships were not there,” he explains. “Whether you are dealing with the Fed, the SEC (Securities and Exchange Commission), etc., you have years of relationship history there. The sides knew each other in terms of diplomacy and how to interact.” But with new regulators, there was a sense of unfamiliarity, and communication was not as strong as it could be, making a more difficult situation for in-house lawyers to manage. These new regulators, he says, had no relationships or communication channels, didn’t know the business, unlike seasoned regulators. But politicians felt that the traditional regulators were a bit too close and moving too slowly.
Later, Odell went to UBS as GC for the Americas, eventually moving into the role of acting GC for the entire group. He says he was at the Fed with other major banks the weekend that Lehman Brothers failed, and they were struggling with that fact as well as the failures of Merrill Lynch and AIG.
“For me, it was initially a bit of confusion,” Odell recalls, “not knowing how the process would be organized. When it became clearer what the challenges were, it was a race against the clock to get enough information and have enough time available to put measures in place to put off a Lehman bankruptcy or a Merrill Lynch sale. It became increasingly clear that there was not going to be enough time, that there would be a regulatory not a market solution.”
And now, six years later, Odell sees a strong focus on financial services. “From where I sit, there is continued focus on the fallout from the financial crisis, continued rulemaking that has to be done as a result of Dodd-Frank.” He sees higher stakes, including anti-money laundering sanctions, regulations on international banks and more.
As for Dodd-Frank, Odell sees an intense amount of scrutiny on the rulemaking process, which has gotten people increasingly focused on regulatory challenges. There have been benefits, he says, including increased interaction between banks and regulators, which could lead to a better regulatory environment.
Odell sees some of the overriding principles, such as better transparency and disclosure in the marketplace, as beneficial, as banks did not have the information they needed during the crisis, and transparency and disclosure should help improve that situation. Odell also points out that communication between banks and regulators is essential, as is education about regulatory trends and changes. With proper cooperation between regulators and banks, there is a good chance that the kind of crisis seen in 2008 will not happen again.