Coast Savings Financial Inc. had a problem: It had a chance to sell to thrift industry giant H.F. Ahmanson & Co., but there was the small matter of a lawsuit against the government.

The thrift company is seeking hundreds of millions in damages because of the accounting changes Congress enacted in 1989, and analysts think it has a good case.

But while Ahmanson wanted Coast and its customers, it didn't want anything to do with the suit.

At times like this you need a lawyer. And so Los Angeles-based Coast enlisted one of the most experienced New York firms in the banking business, Cleary Gottlieb Steen & Hamilton.

Although the firm was founded in 1946-a new kid on the block by Wall Street standards-the biggest banks and thrifts have been calling on the firm ever since consolidation began in the mid-1970s.

The firm's banking group, led by partners Victor I. Lewkow and Robert L. Tortoriello, devised a solution for Ahmanson in two weeks. They helped create certificates that holders can cash in for 100% of any after-tax proceeds from Coast's case.

Golden State Bancorp, parent of Glendale Federal Bank, announced Tuesday that it would distribute similar securities, but they would be worth only 85% of any damages from GlenFed's suit. And last year Cal Fed Bancorp Inc. issued securities equal to 25% of its goodwill claim to separate its lawsuit from its sale to First Nationwide Bank.

Coast shareholders stand to collect a windfall, assuming the thrift does as well as analysts expect in its suit against the government.

As for Ahmanson, they were glad to announce the acquisition-and, because of the goodwill certificates, pay less than market price for Coast.

With many similar lawsuits pending, this Ahmanson-Coast solution could well provide the framework for future thrift and bank mergers hindered up to now by all the legal wrangling.

But if Mr. Lewkow and Mr. Tortoriello were high-fiving each other over getting this deal done, they were discreet about it.

"Could this kind of deal be repeated?" said Mr. Lewkow. "I suppose so. In general, when you get a concept like this out there, it gets followed."

He would know. Since the mid-1970s, when banking consolidation began, Cleary Gottlieb's banking squad has been doing much of the legal groundwork for these deals.

In that time, the firm has argued cases or negotiated with regulators over matters that have resulted in greater powers for banks to protect their capital, underwrite and sell securities, and, of course, acquire other banks all across the country.

"How much have things changed in banking?" asks the affable Mr. Tortoriello. "Well, now Citibank and Chase could merge and it probably wouldn't violate antitrust rules, at least not in New York. When you think that when we started, it was a struggle to approval for a bank buying outside its county, you get a sense of what's different now."

Today, county-to-county mergers are the least of firm's concerns. The banks it has advised recently include First Bank System Inc. in its $9 billion acquisition of U.S. Bancorp; Boatmen's Bancshares in its $XX billion sale to NationsBank Corp.; and First Fidelity Bancorp. in its sale to First Union Corp.

First Bank also hired Cleary Gottlieb to advise on its unsuccessful bid for First Interstate Bancorp.

"Big bank M&A is a strategist's game, it involves anticipating the other's sides moves, especially in a contested deal," said Lee Mitau, chief counsel at U.S. Bancorp, the former First Bank, and a former collegue of Mr. Lewkow at Cleary Gottlieb. "Vic is very good at that."

Although First Bank lost the First Interstate fight, Mr. Lewkow and Mr. Mitau crafted a $200 million breakup fee for the Minneapolis bank, which is believed to be the biggest in history.

Having advised on many of banking's biggest marriages, Mr. Tortoriello and Mr. Lewkow now envision the next step: When banks get so big they will no longer want to be banks at all.

European banks, which have long been involved in more businesses than regulators allow their American counterparts, have already started rethinking whether it's worth it to be a bank anymore.

ING Groep NV, the Dutch financial services company, "debanked" in America so it could build its insurance business here.

And now Credit Suisse Group faces the same dilemma. The Swiss financial services giant said it planned to acquire Wintherthur Insurance Group earlier this year in a deal advised by Cleary Gottlieb.

That could have repercussions for Credit Suisse First Boston, which has a charter from New York State banking regulators. The investment bank might have to give that up, because regulators here frown on mergers between banking and insurance companies. Credit Suisse officials declined to comment.

But as mergers between the biggest banks and insurance companies become more common-and everyone on Wall Street seems to think this will be so-more American banks might decide to shed their banking charter, Mr. Tortoriello said.

"A company like Citibank would love to own an insurance company, but they are constrained by the Fed," Mr. Tortoriello observed. "A company like Bankers Trust, where only 14% of their balance sheet is U.S. deposits, debanking is something they'll definitely think about, if they're not already."

Such a shift would produce a sea change in the American finance business.

A company that debanks can no longer take government-insured deposits. This means the banks would have to sell their huge amounts of deposits as they pursue their management's dreams of being truly multinational, "one- stop shopping" institutions.

Mr. Lewkow and Mr. Tortoriello view these shifts like proud parents who have watched their children grow up.

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