Rules of the Game Have Changed, OTS Aide Warns

Harris Weinstein, the Office of Thrift Supervision's chief counsel, has been roundly criticized by thrift lawyers who say he wants them to play traffic cop with their clients. Despite the grumbling, Mr. Weinstein hasn't changed his position. Last week, he delivered a speech to the Minnesota Institute of Legal Education in Minneapolis, spelling out his view of the thrift lawyer's role:

What is the job of a thrift lawyer?

It has become more complicated even as the industry has become smaller. New laws and new approaches to regulation require lawyers serving the industry to know more, and what we need to know is changing more rapidly than before.

The day is gone - if it ever existed - when a savings and loan lawyer needed to know only the statutes, regulations, and interpretations of the thrift regulatory agency. Throughout the bank and thrift regulatory community, precedents of one agency increasingly provide guidance for decisions by the other three bank regulatory agencies.

The rules have also been changed in ways that require a thrift lawyer to have greater familiarity with a client's financial position and management. For the past 2 1/2 years, OTS has been applying its policy of differential regulation. In numerous matters, the client's legal position depends on its capital strength and the quality of its management. The better shape the thrift is in, the less stringent is the regulatory regime that applies to it.

Of course, legal advice requires more than listing the specific do's and don'ts of detailed regulations.

Mastery of those details does not substitute for a thorough familiarity with fiduciary principles and basic concepts of safety and soundness. Complete and wise advice requires the counseling lawyer to recognize that the specific proscriptions of the statutes and regulations are merely the per se portion of regulation. General principles of fiduciary conduct and safety and soundness must always be considered in rendering legal advice.

What about issues of professional responsibility? Those will continue to be important and will undoubtedly receive considerable attention from the bar.

While I have not prepared an exhaustive survey, it is fair to say that most of the cases against lawyers have resulted from three basic causes: a failure to respond properly to intended illegal conduct by a client, a failure to act properly in the face of a conflict of interest, or a failure to deal properly and honestly with the facts.

Guides to Lawyerly Probity

These cases have prompted the bar to direct renewed and commendable attention to issues of professional responsibility. We expect as time goes on the bar will add greater specifics to these principles:

* That a lawyer should, if necessary, go up the corporate chain of command to seek to induce a corporate client to abandon an illegal course of conduct.

* That a lawyer may not assist a client in implementing an illegal plan.

* That the lawyer must give serious consideration to resignation if the client persists in going forward illegally.

* And that a lawyer may not tell misleading partial truths in circumstances where the law would make such action by the client actionable.

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