Bailout firms have program recipients among their clients

By Matt Kelley, USA TODAY
WASHINGTON — All six of the law and accounting firms hired by the Treasury Department to help manage the $700 billion financial bailout have clients who received the federal money, contracting and regulatory records show.
The firms also have been involved in structuring complicated financial instruments tied to risky assets such as sub-prime mortgages, according to their websites and Securities and Exchange Commission filings. The collapse in value of those assets is one cause of the financial crisis.
One law firm, Thacher Proffitt & Wood, dissolved five days after Treasury announced its contract because its work arranging complex transactions had dried up. Sonnenschein Nath & Rosenthal, which took over the contract from Thacher Proffitt, also has clients that received bailout funds, its website shows. Treasury has paid four law firms about $4.1 million so far to help the department create and implement investment agreements, according to a federal contracting database. Treasury has not disclosed how much it is paying the two accounting firms, which are helping the department develop internal financial controls.
The relationships between the firms and bailout recipients are cause for concern because the firms may have an interest in protecting their clients, says Elizabeth Warren, a Harvard University law professor and head of the bailout's Congressional Oversight Panel. (continues...)