Bank Lawyer's Blog

We Won't Tell What To Do Until After We Punish You For Not Doing It

The CFPB isn't the only federal government agency that is promulgating new "regulations" by enforcement action. According to yesterday's American Banker (paid subscription required), the OCC's been playing the same game, especially with the BSA.

Few dare talk about their concerns publicly, for fear of alienating regulators. Privately, they say that BSA exams have become more rigorous and focused in recent years, digging deeper into the weeds of processes, systems and controls. Foot-dragging and shortcomings are being met with stiffer monetary penalties and lengthy lists of demands for systems improvements and additional personnel.

Yet it's not clear that even the regulators know exactly what they want from bank BSA programs. Instead, critics say, they're looking to the private sector for the latest in best practices and then seeking to transmit those ideas to the rest of the industry through regulatory decree.

BSA officers report combing through consent orders and regulatory pronouncements with urgency, looking for clues of subtle changes and what's coming next. "We are now in an era of 'regulation by enforcement action,'" says Teresa Pesce, head of the Americas AML practice at consulting firm KPMG.

"Banks feel that they can no longer look at the statutes and regulations to know what to do," Pesce says. "They have to look at the most-recent regulatory guidance or enforcement action against their peers, and then try to plug those holes, as opposed to creating more thoughtful and sustainable programs."

"Thoughtful and sustainable programs?" What's that got to do with covering your backside, avoiding second-guessing from your "superiors" and your "peers," and protecting your government retirement benefits? Let's get with the program here, Teresa.

According to the American Banker's sources, the causes for the uptick in scrutiny on BSA is open to debate.

Some point to the lingering anger of Congress and the public over Wall Street's role in the financial crisis, and the failure of regulators to catch it. Others note that with banks having largely cleaned up their credit problems, quieting the safety and soundness risks that had dominated regulators' concerns in recent years, all those examiners hired at the peak of the crisis now have more time on their hands.

Idle hands are the devil's workshop.

One former OCC official even said much of this may have to do with career advancement by small bank examiners who want to earn notches in their gun by taking down some too-small-to-fight-me community banks, and thereby be promoted to examining the plutocrats of commercial banking. I guess it's every examiner's dream to make yourself such a pest to Bank of America that it hires you just to get you out of harm's way.

FinCEN's Director Jennifer Shasky Calvery claims it's because FinCEN is getting better at using the billions of bits of information that banks feed into its maw every day via various reporting avenues. She even talks about a bank that included a phone number in a SAR that matched a number found in Osama Bin Laden's file cabinet found by Seal Team Six in the follow-up to ventilating the former terrorist-in-chief. Jennifer won't tell us what the people who parse these nuances did with the number. Maybe the NSA used it to order a truck load of peperoni and italian sausage pizzas to be delivered to a kabob house in Kandahar, demoralizing a phalanx of jihadists. Whatever, she wants banks to know that she and her fellow "sheriffs" are cracking down on banks because all of those SARs they're defensively filing are no longer fed to FinCEN's pet goat.

So, bankers, buckle up and get ready for more _regulating-by-enforcement. What's good for FinCEN's good for the country, and the bad guys are moving too fast to bother with that irksome Administrative Procedures Act. The regulators will tell you what you did wrong after you've done it, not before. If you don't like that, well, that's tough nuggies. In this brave new world, the ends justify the means.

Shaming The Shameless

While we're sure it's merely a coincidence, hot on the heels of the letter that Rep. Pete Sessions sent to the Treasury Department's Inspector General that complained about the repeated failure of the Comptroller of the Currency to issue a final decision in the case of Patrick Adams, the Comptroller raised his middle finger to the requirements of 12 USC 1818(h) issued yet another extension of the deadline to issue a final decision, this time extending the date of decision from August 13 to September 30. As one observer pointed out, at least this time the Comptroller gave himself a deadline to issue a final decision. Whether he "sticks to it" remains to be seen.

Mr. Adams' plight has generated some interesting email. Customarily, private practitioners are most harsh in their indictment of the sort of cavalier nose-thumbing at the requirements of federal law by those whose job it is to enforce it that we've seen demonstrated in this case. However, former enforcement attorneys, such former OCC attorney Robert Serino, whose concerns about Mr. Adams were highlighted in the post linked above, have also expressed their displeasure with the way the regulator has ignored the requirements of fundamental fairness (and, as noted above, the deadlines set by federal statute). One former regional counsel for a federal bank regulatory agency wrote to complain about the "shameless arrogance" displayed by the federal government in this case and to assert that in his decades both in government service and on the other side of the table from the government, he had "never seen any type of enforcement action instituted against an individual that remotely resembles the OCC action against Mr. Adams."

Frankly, neither has anyone else with whom I've spoken about Patrick Adams, including former OCC counsel. It's not only questionable conduct, it's almost inexplicable. I say "almost," because after decades of my own experiences with federal regulatory attorneys and enforcement personnel, and after some of the spittle spewed my way in the last few years in reaction to blog posts by a couple of Erik Dorfs currently at home in the bowels of the Mother Ship, nothing much really surprises me anymore.

Regulating With A Sledge Hammer

*Mayer Brown published a client alert last week about the CFPB's recent squeezing of $10 million in blood out of the turnip known as ACE Cash Express, a (surprise! surprise!) payday lender. The Adjustment Bureau determined that ACE is not the place with the helpful payday hands, but the place where UDAAP runs rampant. Specifically, the CFPB determined that ACE engaged in unfair, deceptive, and abusive acts or practices in connection with the collection of its own debts.

Mayer Brown lists some substantial problems raised by the CFPB's enforcement action (which ACE settled without an admission of wrongdoing, proving, once again, that the threat of paying your defense counsel more than the government entity that's pursuing you is a powerful inducement to "folding."). Among those are the following:

• The CFPB apparently plans to use its UDAAP authority to subject first-party debt collectors to many, if not all, of the requirements of the federal Fair Debt Collection Practices Act (FDCPA);
• Notwithstanding repeated requests by businesses for clarification of the circumstances in which a company will be held vicariously liable for violations by its service provider, this enforcement action continues the CFPB’s refusal to provide any guidance regarding that question; and
• The CFPB’s action in this case is one more example of its practice of imposing requirements through enforcement actions rather than notice-and-comment rulemaking—here, essentially circumventing the CFPB’s own ongoing debt collection rulemaking, which posed questions regarding the appropriate standards for first-party debt collectors, through the principles announced unilaterally in this enforcement action.

Financial institutions that collect on their own debts or that rely on service providers to serve their customers should take note.

I advise reading the entire alert, which is not long and, therefore, should not deter even members of Gen Y. The CFPB is reading provisions of the FDCPA that apply to third-party (not first-party) debt collectors into the UDAAP provisions of Franken-Dodd, and then applying them to lenders trying to collect their own debts, and doing so not through the rule-making process, which requires public notice and opportunity for comment from all interested parties, but through enforcement action is "disconcerting." It's also dinging lenders for not only their own actions, but actions of third-party service providers without (notwithstanding industry requests) providing lenders with guidance as to when they will be held liable for third-party actions. That is also "disconcerting."

Mayer Brown concludes that the implications of this action extend beyond the payday lending business.

The CFPB’s ACE Cash Express enforcement action casts a significant shadow, not just over payday lenders, but also—and likely most significantly—over financial institutions that collect their own debts or rely on service providers to serve their customers, and that continue to struggle with the regulatory uncertainty created by the CFPB’s regulation by enforcement approach. As with other recent enforcement actions and regulatory pronouncements, the CFPB has taken an expansive and aggressive view of its authorities and a narrow view of the specific limitations Congress imposed, clouding legal requirements rather than generating clear rules that facilitate compliance. Financial institutions should carefully manage their potential exposure to CFPB enforcement activity

That is wise counsel.

For a federal government entity with tremendous power, the Adjustment Bureau takes a fast and loose approach to exercising that power. Instead of acting with prudence and restraint, and through the inconvenient requirements of due process and fundamental fairness provided by the Administrative Procedures Act, these "new sheriffs in town" prefer to shoot first and ask questions later. Rule-making by enforcement action. The CFPB backed off including enforcement attorneys on its examination teams after regulated institutions squawked, but its zeal to crack down on "evil" with a heavy hand because, after all, they know it when they see it is giving its congressional critics additional ammunition to support their efforts to knee-cap it with "oversight" of varies sorts. In the battle for its future, its overreaching may end up being its opponents' best weapon against it.

*Photo's Source: kathrinlonghurst.com

Alleged "Overcharger" Settles

Almost one year ago, we discussed an investigation by the Colorado Attorney General into the alleged inflation by foreclosure attorneys of certain foreclosure costs, and, subsequently, allegations of more widespread falsification of fees and costs by attorneys handling foreclosures in Colorado. At the time, I expressed the view that if there was anything to these allegations,"there are going to be some lawyers in Colorado who are in deep water without a life jacket. I hope they're all strong swimmers."

Last week, the Denver Post reported that at least one of the firms involved in the scandal had decided to haul itself out of the deep water by paying beaucoup bucks to settle with the State of Colorado and with class action attorneys.

Tens of thousands of Coloradans whose homes were foreclosed on since 2009 by law firm Aronowitz & Mecklenburg will share in a massive class-action lawsuit settlement over allegations the lawyers regularly inflated fees that homeowners were forced to pay to save their house.

The settlement, on paper since April but only now getting court approval, comes just days after the Denver law firm agreed to a separate $10 million deal with state investigators to settle an investigation into the same alleged misconduct.

The law firm — owned by Robert Aronowitz, his daughter, Stacey Aronowitz, and her husband, Joel Mecklenburg — is to dissolve in the next six months, according to terms of their settlement with the Colorado attorney general's office.

But not before the firm pays back roughly $2.5 million to more than 32,000 families — money the lawyers allegedly overcharged for the posting of legal notices in the cases.

The law firm denies it did anything wrong, but agreed to the settlement to avoid costly litigation, according to a copy of the 164-page document filed in Denver district court.

"Avoiding costly litigation." Are they worried about their own counsel padding, churning, or upcharging? Just wondering.

Before becoming misty-eyed over how damaged homeowners will now be made whole, pay attention to how the $2.5 million is being divvied up.

Those affected in the Aronowitz settlement should see a check ranging from $20 to $225 in the next couple of months, depending on which of three classes they belong to. Postcards have been mailed advising homeowners of the settlement.

Some people might get more than one payment, such as those who cured more than one foreclosure, even on the same house.

The lawsuit's plaintiffs — Rodrick Kemp, Linda Donna, Richard Lemesany, and Martin and Michaelie Wingo — each are to receive an additional $10,000, though the Wingos will share that amount. Another $875,000 will be paid to cover legal fees.

[...]

The three classes and the payouts include:

• Homeowners who paid a county public trustee what they owed on a mortgage, including the lawyers' fees, and stopped the foreclosure process, known as a cure. They will get $225 per foreclosure;

• Those who stopped a foreclosure through a loan modification. They will receive $100 only if they opt-in on the settlement, up to a maximum $1.1 million to be paid out for all;

• Homeowners who lost their house to foreclosure auction for a price that was less than what they owed. They will receive $20 per foreclosure.

Investors who purchased properties at county foreclosure auctions are not covered by the settlement because they were not plaintiffs, although they also were required to pay the lawyers' bills, which included the posting costs.

Also not covered by the settlement are other fees the attorney general alleges were overcharged, including up to $100 for a one-page document, called a "statement of qualified holder," that purportedly takes seconds to fill out.

Expenses charged for the filing of nonexistent Rule 120 lawsuits, revealed by The Post last year, also are not part of the settlement.

By accepting the payments, homeowners cannot sue for any other charges they might have overpaid in the foreclosure.

Aronowitz's $10 million settlement with the attorney general will be used largely to cover legal fees in the case and future consumer education. Only a few homeowners with current foreclosure cases are to be reimbursed.

Yes, once again,members of the "class" get peanuts and the big winners in both cases are the plaintiffs' attorneys. Sure, the few named class action plaintiffs get $10,000 each, but the class action plaintiff's lawyers get 80 times as much. The rest of the allegedly adversely affected borrowers get between $20 and $225.

In fairness, it appears that if there was wrongful conduct (and the law firm that settled has neither admitted nor denied that fact), it has been "deterred," at least with respect to the settling law firm. According to the Post, the settling law firm is going to be "dissolved," although I've read other reports that suggests that it may be sold rather than liquidated. It will be an enterprising buyer who would buy that firm's business, especially in light of the fact that the residential foreclosure heyday is long past. Then again, Colorado has legalized recreational marijuana use, so there's always hope.

The other two accused firms have decided to slug it out. Apparently, paying their own trial attorneys is not yet a sufficient inducement to lead them to pay off the plaintiffs' counsel and the state to just go away and leave them alone.

The American litigation system: everyone wins, as long as "everyone" is a trial lawyer.

CFPB Proposes To Establish "Gossip Column"

As part of its ongoing effort to destroy the private business of banking in a free market economy and substitute a federal government-directed banking system better serve the consumers it was created to protect, the CFPB has recently proposed to have consumers who submit complaints to the CFPB to also submit a narrative of the complaint, all of which, together with a written response from the financial institution that is the subject of the complaint, would be included in the CFPB's publicly available Consumer Complaint Database. Why? Glad you asked.

These first-hand accounts would make the database more useful by providing more context to the complaints, and allowing the public to see if a problem is an isolated incident or part of a bigger trend in a certain geographic area or a particular company, the bureau contends. Plus, more details about complaints would help consumers who are considering a certain financial product or service make better decisions, according to the bureau.

[...]

The bureau also hopes that these narratives would serve as an additional incentive for businesses to address problems with their financial products or services and “more vigorously compete over good customer service.”

“The consumer experience shared in the narrative is the heart and soul of the complaint,” said CFPB Director Richard Cordray. “By publicly voicing their complaint, consumers can stand up for themselves and others who have experienced the same problem. There is power in their stories, and that power can be put in service to strengthen the foundation for consumers, responsible providers, and our economy as a whole.”

In addition, what red-blooded American doesn't love a public bitch-fest, especially one available over the internet? OK, maybe Cardinal Dolan doesn't, but most of us can't wait to hear about how Betty Lou got hosed by Citibank cutting off her credit card solely because she overdrew her credit line five days in a row at "Crunchy Munchie's" pot shop in downtown Denver. She simply forgot she used it yesterday, and yesterday kept turning into today, which turned into tomorrow, and baby, that was one powerful batch of hash marshmallow parfait! And the really amazing part was that they charged her credit card in what is an all-cash business. How rad!

As data wonk Bob Hayes discussed a couple of years ago at a Federal Reserve Bank forum on the CFPB's credit card complaint database, the ABA and other banking mouthpieces aren't crazy about a federally sponsored "gossip column" whose reliability has yet to be proved. While Bob agreed with such critics that more research regarding the validity of complaints is in order, he also contended that "[t]he current analyses, however, suggest that the CFPB credit card complaint database provides clear, reliable and valid information for banks about their credit card practices."

The CFPB's proposal is open for public comment for 30 days. Bank's that have concerns about the issue can, of course, submit their objections to The Adjustment Bureau. However, as The Dallas Business Journal's Kent Hoover dryly notes, "it doesn’t look like industry complaints will have much influence on the bureau." I think that's a safe bet.

What bankers can look forward to once this process takes full flight is what the CFPB and their primary federal bank regulators will do with the "narrative" bashings banks are surely going to suffer. We all know that "reputational risk" is a term the regulators have fallen in love with these days. It's such a squishy term that it can form the basis for a safety and soundness violation any old time a regulator wakes up on the wrong side of the bed. Just wait until the public complaint "narratives" start forming the basis of informal, or even formal, enforcement action. The CFPB will call that "validation."

The Fair Lending Extortion Racket Runs On

The law firm of King & Spalding recently highlighted a problem that we last discussed eighteen months ago, and, since then, has only gotten worse.

Cities and counties that have experienced increased foreclosure and vacancy rates in the aftermath of the housing market crash of 2007-2008, perhaps emboldened by recent court decisions, have recently filed several new “predatory lending” cases under the federal Fair Housing Act (“FHA”) against financial institutions. In the last six months, for example, Los Angeles, Miami, Providence, and Cook County, Illinois, have filed lawsuits under the FHA against a variety of mortgage lenders to attempt to recover lost property tax revenues and other damages.

The cases allege either traditional redlining (excluding minority areas from lending activity) or "reverse redlining" (targeting minority for subprime, Alt-A, and other high-cost loans). As is the rage these days, the plaintiffs use the doctrine of "disparate impact" to undergird their claims of violation of the Fair Housing Act. The authors allege that decisions of federal district courts that refuse to dismiss the lawsuits, as well as the settlement of the Mt. Holly case  before the Supreme Court could hear oral arguments (much less decide it), have emboldened cities and counties to pursue these claims. Of specific import are recent decisions of a federal district court in lawsuits filed by the City Los Angeles against Wells Fargo and Citigroup, in which the judge held that the Sixth, Ninth, and Tenth Circuit Courts of Appeal have all determined that "disparate impact" under the FHA is a viable theory. As K&L Gates also discussed not long ago, the Fifth Circuit recently applied HUD's "disparate impact rule" in a fair lending case.

The settlement of the Mt. Holly case is cited by both firms as a setback for lenders and an encouragement for municipalities that want to blame mortgage lenders for their broken neighborhoods. That's not because the theory of "disparate impact" in fair lending cases is likely to be upheld, ultimately, when the US Supreme Court finally gets a chance to decide the issue (and there are powerful arguments against the application Of the theory to the FHA), but because of the obvious problem we've repeatedly noted: these cases, being based on sophisticated statistical analyses that require high-priced consultants and attorneys, are expensive for the defendants. We'd love to see them slug it out to the bitter end and to never settle, because, as King & Spalding concludes, settling questionable claims only encouirages more questionable claims. However, the best business decision for a specific insitution may very well be to pay off the plaintiffs and put the matter behind them. At least, until the next busted pesthole of a city decides to blame decades of mismangement, high taxes, and anti-business laws and regulations manned by sometimes-corrupt bureaucrats, entirely on lenders who are not themselves pristine.

On a positive note, the more the City of Los Angeles sues businesses, the more California-based businesses become Texas-based businesses.

The Rule of Lawlessness

Former FDIC Chairman Bill Isaac's recent rant opinion piece in The Wall Street Journal (paid subscription required) was a masterful smackdown of the current administration's handling of the conservatorships of Fannie Mae and Freddie Mac. Basically, Isaac accuses the executive branch of acting illegally.

The FHFA as conservator is a fiduciary—or trustee—for the shareholders of Fannie and Freddie. Its job is to, as the law says, "conserve [the enterprises'] assets and property" for shareholders while Fannie and Freddie rebuild their capital base and eventually exit the conservatorship.

That's not what has happened. When presented with the once-unthinkable reality of Fannie and Freddie making enough money to retire the Treasury's senior preferred stock and build enough capital to meet their financial obligations without government assistance, the Obama administration moved in 2012 to confiscate all Fannie's and Freddie's profits and wind down the two mortgage giants. Investors in Fannie and Freddie have responded by suing in federal court.

The government is trying to deny the plaintiffs the right to discovery (sound familiar?) because, according to Isaac, it's afraid of what might be revealed.

This information could include emails and other documents demonstrating that the government's true intent was to seize current and future Fannie and Freddie profits for itself and leave shareholders with nothing. To justify its position against granting discovery to plaintiffs, the government argues that disclosure of current and future plans for the conservatorship could be "disruptive to the housing market and to the nation's economy." Almost laughably, the government also argues against disclosure because that could "create market perception that the Enterprises are not financially viable," and that "this would have a negative impact on sales of debt and mortgage-backed securities." Putting aside the circularity of these arguments, the real absurdity is that the government's own activities have deprived Fannie and Freddie of capital and kept them too weak to emerge from conservatorship. By taking all of the enterprises' profits, the government has left them undercapitalized and permanently unable to rebuild their capital.

Isaac asks an obvious, important question: what's does this hijacking mean for the future? His answer is sobering.

Given the government's dereliction in its duty to conserve value in Fannie and Freddie, an obvious question arises pertaining to any "reform" of housing lending proposed by the administration and enacted by Congress. If the administration plans to wind down Fannie and Freddie with no recourse for investors, or to nationalize them in creating a new federal housing entity, as a Senate housing reform bill would do, where will the capital come from to finance the new system? What investor would put capital into something so uncertain and so unprotected by law as Fannie and Freddie have proved to be?

There can be varied opinions over which reform is best for our country or what, if any, role Fannie and Freddie will have in a future housing market. But there should be no disagreement about the law. Capital follows the rule of law, and if investors can't count on that in the U.S. and in the housing markets, they will put their money elsewhere.

"Capital follows the rule of law" applies beyond Aunt Fannie and Uncle Freddie, as important as they may be to the housing market and the economy as a whole. It also applies to the entire banking business.

Those of us who've been representing banks for a number of years (October will mark my 40th year of wandering in that desert) can't recall a time, outside of the relatively brief episode surrounding the collapse of the savings and loan business in certain parts of the country, when the federal government has treated adherence to the rule of law with such elasticity. From the envelope-pushing "disparate impact" doctrine's foray into fair lending (and the use of every artifice to prevent the SCOTUS from having an opportunity to strike it down), to Operation Choke Point and its "informal" enforcement through "informal" regulatory examinations and supervisory pressure, to cases like those of Patrick Adams, whose David-vs.-Goliath struggle seems to serve no purpose other than sending a message that due process is a pipe dream if you fail to knuckle under to a brow beating, to the avalanche of regulations following the enactment of Franken-Dodd, I cannot recall a previous time when community bankers and credit union boards and management have had such a sense of anxiety that borders, in many cases, on despair.

I understand why capital would flow to the Too Big Too Fail. They get hit with a few hundred million here, a few billion there, and rarely miss a beat. They take a licking and keep on ticking. The Too Small To Save don't have that status, and they know it.

Perhaps it's cognitive dissonance. Perhaps its the blind hope that "this, too, shall pass." Perhaps it's simply the fact that "this is what I know how to do and it's all I know how to do, so I'm gonna keep on doin' it until they force me to stop." However, if you have options as to where your capital will flow, how long before you cash in your chips on the banking business and take it to a business where the regulators who can shut you down and/or sue you don't have to take remedial educational courses to learn the basics?

I'm not advocating a course of action, I'm merely asking a question.

Luetkemeyer Launches Attacks On Choke Point

Although Missouri Congressman Blaine Luetkemeyer made some publicity hay out of the bill he introduced last week (the End Operation Choke Point Act of 2014), it really hasn't got a prayer of proceeding, much less passing. It would prevent federal bank and credit union regulators from prohibiting, restricting, or discouraging a bank or credit union from providing a product or service to any entity that meets one of three safe harbors: (1) is licensed and authorized to offer the product or service; (2) is a registered money services business; or (3) provides a "reasoned legal opinion that demonstrates the legality of the entity's business under applicable law." It's not merely that the definition of "reasoned legal opinion" raises enough questions to fuel a plethora of potential interpretative shenanigans by regulators who want to quash the business, it's the fact that legislative attempts to limit regulatory enforcement discretion always bring out the Chicken Littles among the regulatory bodies, who will warn that this is a giant leap off a cliff that leads straight into the abyss. They'll spin it as legislation in support of "bad guys," and they're often in effective in taking that approach. No pol wants to be on record as supporting businesses that later turn out to include a few crooks.

Nice try, though, Rep. Luetkemeyer. Banks appreciate the effort.

I did, however, appreciate the attempt to forbid the regulators from adopting "guidance" regarding the safe harbor. Instead, regulators would have to adopt regulations in accordance with the APA, and afford the opportunity for public comment. Slamming the door on subterranean regulations adopted as "guidance" is something that many banks would love to see extended beyond Operation Choke Point.

Another nice touch is the provision that attempts to restrict the ability of the federal government to use FIRREA's subpoena power to go on fishing expeditions. That one ought to be resurrected in other legislation if this bill (as I expect) goes nowhere.

Finally, the introduction of the legislation gave opponents of Operation Choke Point (whose motto is: "businesses with nothing to hide can always prove that they aren't engaged in criminal activity") another chance to fire a shot across the bow of the Department of Justice.

“In an effort to drive legally-operating, licensed and regulated companies out of business, federal banking regulators in cahoots with the Department of Justice (DOJ) are placing so much regulatory pressure on financial institutions that certain businesses not viewed favorably by the Attorney General and the Administration are eventually choked-off from the financial services they need to survive. That notion goes against the very nature of our free market system,” Luetkemeyer said. “It is time to stop these backdoor attempts by government bureaucrats to blackmail and threaten businesses simply because they morally object to entire sectors of our economy.”

Of more interest is Luetkemeyer's maneuver in late May to insert an amendment into the appropriations bill (see Section 554) that chokes off funds for Choke Point. It passed on a voice vote. While the Senate is controlled by Democrats, and it may not survive in the Senate, the prospect for another budget gridlock battle may, in fact, make that a more potentially lethal weapon for attacking Choke Point. It may boil down to a matter of what and who gets thrown under a bus in last-minute trade-offs to move the DOJ's appropriations legislation through both houses. It's not anything to count on, but in horse-trading, Choke Point may be regarded as a nag to sent to the glue factory so that someone's thoroughbred can survive. Sausage making is a messy business, so you just never know what might be ground up.

The Art of the Deal

Having empurpled with rage the kisser of a regulatory agency, I'd like to turn now to offending attorneys for various bank vendors who seem to take to personify the quality of some lawyers that business clients love to hate: we're "deal killers."

Actually, some of us are.

A case in point: a large financial institution sends out an RFP to solicit vendors to sell their services to the bank related toi a line of business that the bank is pursuing. There's a great deal of money to be made, so you would expect that the vendors who want to bid on the work would put on their best "smiley face" and also put their best foot forward. You would also think that they'd want to avoid offending the object of their affection by committing a faux pas akin to, while curtsying to the Queen of England, breaking wind with the force and sound of a watermelon hitting the sidewalk after a 10-story drop.

The initial contract that's customarily involved in a bank's RFP process is a mutual nondisclosure and confidentiality agreement, almost always drafted on the bank's standard form. Most vendors who are serious about bidding either merely review the agreement to ensure that they're not selling their children to an Eastern European white slave ring, then sign it, or request changes where there is a critical legitimate concern with a provision. Seldom will a bidder who seriously wishes to make a good first impression turn the nondisclosure agreement over to the equivalent of a first-year law student who's intent on spotting issues in order to make his contracts professor proud.

Then, you have the bidder who's counsel revised an entire paragraph on the first page of the nondisclosure agreement to change nothing of substance, only to re-designate clauses labeled "(i)", "(ii)," and "(iii)" to "(a)," "(b)," and "(c)." This is correct from a formatting standpoint, but in the grand scheme of things, so unimportant an issue to raise that it rings a bell as loud as Big Ben at the stoke of midnight.

The responsible bank officer ponders, "If this is how they act when they are romancing me, how will they behave like when they have had their way with me? How long will it take, and what will it cost me, to negotiate the vendor agreement if I select this navel gazer and picker of sub-atomic nits?"

Snatching defeat from the jaws of victory: it's a talent.

"[T]here are millions of people out there, just like you and me, with their thumb on the self-destruct button."--Etienne de L'Amour.