As the government spends $700 billion in taxpayer funds to "bail out" financial institutions — by, in substance, buying bad assets, "voluntarily" extracting preferred stock from banks, and other steps — voters hear that the government will recover much of the cost by selling those assets back to the private sector.

As I listen to this, it calls to my mind the 14 years I spent as a lawyer representing the buyers of the last round of semi-nationalized U.S. banks: the hapless people who bought the banks (loaded with bad assets) that the government seized in the last financial crisis, the savings and loan crisis of the late 1980s.

Through the 1980s, losses derived from high interest rates to depositors versus low interest rates from long-term home mortgages forced bankers to push the boundaries into higher-risk assets, leading to the failure of hundreds of thrifts. Banking agencies seized hundreds of thrifts and sold them to new owners with promises of government cash payment assistance, tax benefits to shelter profits of the new owners' other businesses, and regulatory forbearances that limited the amount of cash capital the new owners had to put up.

And then, after the deals were done, and the 1988 elections were complete, Congress and the president sat down to hammer out a long-term fix for the financial system. The law they drafted, the Financial Institutions Reform, Recovery, and Enforcement Act, was a sound one that established the basis for 20 years of banking stability.

But FIRREA contained a very bad element. The government decided the deals of the 1980s were too good to the buyers. The politicians knew that the public is always happy to see the government stick it to bankers — the public makes no distinction between the old bankers who wrecked the banks and the new bankers who stepped in to save the banks. So the government included provisions in FIRREA and subsequent statutes that breached the deals. The government seized back many of the assets it had just sold — but kept the money the investors had paid. The government demanded the investors pay more money — invest more capital by taking it out of other businesses — and reimposed taxes it had promised not to levy.

The private investors sued, which is where I come in. I was the lawyer who coordinated litigation strategy and communications between the 65 law firms that represented the more than 120 plaintiffs from across the country who ultimately all were sent to the United States Court of Federal Claims in Washington. Their cases were collectively titled the Winstar-Related Cases, after the U.S. Supreme Court's test case for the 120-plus cases, United States v. Winstar Corp., decided in our favor on July 1, 1996. After that ruling, I analyzed government briefs in 35 of the cases, and identified a dozen government defenses raised in cases across the board, which we called the "common issues" but which the presiding judge, Loren Smith, informally termed the "Sisson issues." In late December of 1997, Judge Smith ruled in favor of plaintiffs on all "Sisson issues."

And yet, despite victories in 1996 in the Supreme Court and in 1997 in the "Sisson issues," stubborn Department of Justice litigation tactics, combined with a pro-government Court of Appeals for the Federal Circuit, so dragged out the litigations that many plaintiffs gave up, or were finally undone by late rulings in the appellate court. Even today, some of the largest cases are dragging on, 19 years after the government breached the contracts.

A wise and experienced small-city lawyer from Oregon, representing plaintiffs in one of the cases, said after years of frustration that litigating against the United States "is like dancing with a bear. You don't stop dancing until the bear gets tired."

As you contemplate buying bank-related assets from the government, never forget: you are beginning a dance with a bear — a marathon reminiscent of dance marathons in black-and-white newsreels of the 1930s, in which sleep-deprived partners shuffle around the floor, hoping to last long enough to win the prize. After you buy the government assets and do the deal, and after the Congress and the president pass the laws that breach your deal, the government bear will dance with you until you drop. And unless you have crafted a comprehensive agreement that anticipates all the bear's steps, you will win no prize at the end.

Space does not permit listing the bear's litigation dance steps here. Believe me, as one who danced with the bear for 14 years, its steps are numerous, tricky, and full of trips and twists.

Sadly, investing in the U.S. government's breach-of-contract court system (by paying lawyers to pursue claims in that system) is an economically irrational choice for any competently run business that could deploy the same cash in its own productive activities. Taking into account the 10 years or more of delay before buyers receive payment of damages, the interest that does not accrue on the damages during all those years, the amount of the litigation fees (in the millions), and the lost interest and income buyers would have earned on those litigation fees had they invested those sums in their businesses rather than in their litigators, even a large judgment will leave buyers less well off than if they just let the government get away with the breach scot-free.

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