America was in party mood yesterday following the historic US presidential election victory of Senator Barack Obama.
Late on Tuesday, much of the country was at an election night party which, in many cases, spilled out onto the streets during the early hours of Wednesday. Several hours later, the celebratory mood had barely dimmed.
“Everyone is very excited,” said Paul Weiss’s own ‘President elect’, its chairman from next January, Brad Karp. “Yes, I went to an election night party. I’d describe the mood as one of happiness, relief and exhaustion. It’s good for America, we really do need this change.”
Karp’s comments were echoed by those of Tim Hester, chair of the management committee at Washington, DC-headquartered Covington & Burling. “It’s a very exciting day,” said Hester. “It really feels as if we’ve made a step forward in our standing in the world.”
Of course, as Hester readily admits, Washington is a heavily Democratic city so there may be a little bias there. That much is obvious just from the election map, where the whole of the East Coast is blue. But there was no escaping that in the hours after Obama’s landmark victory, much of America was flush with enthusiasm, energy and excitement.
Even some staunch Republicans were in a welcoming mood for the President elect, albeit with the odd note of caution thrown in.
“I’m optimistic and hopeful,” said Milbank chairman and former fundraiser for Republican candidate Rudy Giuliani, Mel Immergut. “Hope is the word of the day. It’s great that the election has been so positively received in the US and around the world. But there is no question the new president will be embarking on the most difficult task any president since Franklin D Roosevelt has confronted. He’s going to need the support of the US and the world.”
Obama will certainly be focusing on that task well ahead of his 20 January inauguration. And last week the attention of America’s lawyers was already turning to the changes the administration is likely to implement next year.
“We’re expecting there to be a very heavy regulatory push on the financial sector,” says Hester. “We’re certainly anticipating heavy restructuring of the regulatory regime for financial services. We’re also anticipating there’ll be a push on health insurance issues and energy while more broadly, Congress is expected to push for the review and investigations into certain industries, including pharmaceutical, banking and energy.”
Hester also said there was a perception the new government would try to “reassert its authority over certain areas where there has been a lessening of regulation”, adding that this could have a major impact on corporations. “This uncertainty will require legal guidance,” Hester said.
Over at the New York office of Allen & Overy, managing partner Kevin O’Shea concurrs with Hester that financial regulation would definitely increase. “This is something that everybody expects and as a firm we’ve been putting in place plans and implemented a strategy to enable us to take action and respond,” O’Shea says.
“Bank regulatory work has seen a sharp increase and we’re in the process of building up our team in this area.”
Earlier this year, A&O hired Cadwalader special counsel Doug Landy as a partner in the firm’s banking practice. “It was fantastic timing,” says O’Shea. “His experience in the bank regulatory field has been a real asset to the firm in the US. I think we’ll continue to recruit in this area but also realign the team we have to fit the needs of our regulatory practice.”
There is a broad consensus in the US that a tidal wave of new regulation is coming. As Paul Weiss’ Karp puts it, “everyone expects we’ll see more regulatory oversight in general and particularly increased oversight of the financial world. But it’s unclear what shape the financial regulation will take.”
So the big question, to which no-one so far knows the answer, is what sort of regulation will an Obama administration introduce?
“I hope it is regulation that is not inconsistent with encouraging the business environment, and that will be a very challenging thing to do,” says Cravath Swaine & Moore presiding partner Evan Chesler. “All of the regulations put in place after the last financial crisis didn’t stop this one. So I hope there is not regulation for the sake of regulation.”
Equally there has been much talk of a new super-regulator to replace several of the US’s current regulatory bodies, a line of thought that Lovells US regional managing partner Marc Gottridge cautions against.
“People in the UK may think that now Obama is president we will be able to implement an FSA-style body,” Gottridge says, “but I don’t think this will happen. We have a federal system and a constitution and you can’t just do away with state law. There will still be several bodies governing the banking and insurance industries as well as state law. The hope is that it will be much more streamlined and focused.”
Certainly more regulation will mean more work for lawyers in the short term, but according to Cravath’s Chesler, the “win-win scenario” would be regulation that provides growth rather than inhibits it.
“The best case for law firms would be new regulation that is consistent with the best case for the economy,” Chesler adds. “That is, a pro-growth form of regulation that stimulates the economy rather than inhibits it.”
What is certain is that in the hours and days after such an historic win, there are great expectations in the US from an Obama administration. But as Chesler says, that’s the easy part: “Delivering on those expectations is the hard part.”