Muffie Benson-Perella (muffie AT dealbreaker.com) is an Associate in the Investment Banking Division of a "Bulge Bracket" bank. She holds a B.A. in French and Art from Vassar College and an M.B.A. from Harvard Business School. Her regular column "Heard in the Suite" is a probing (and, ahem, fictional) weekly look into the secret lives and behind the velvet curtains of the investment banking world.
I saw today on DealBook that first year lawyers are getting bigger and bigger salaries. Chicago firms apparently have raised first year associate salaries to $135,000. In New York it is supposed to be $145,000 or something.
First of all, this isn't a lot of money so I don't see what everyone is upset about.
Second of all, it is too much money to be paying a first year lawyer.
Every time I come across a "Wall Street Lawyer" it is in an obstructionist context. My entire experience with them has involved their stifling and oppressive vice-grip on new and creative ideas. They dampen financial innovation and put up obstacles in front of otherwise perfectly viable deals.
There really are far too many lawyers on Wall Street charging far too much money for far too little work.
Don’t think this isn't bad for the economy either. There is a direct and very strong correlation between a high level of lawyers, per capita, and high interest rates. This is because the excess of legal fees requires banks, the number one consumer of legal services, to press interest rates higher to meet the costs driven by the lawyers.
I did a quick regression using data on interest rates from the Economist in France, Britain, Japan, and the United States. I think the results speak for themselves.
As you can see, there's not just a relationship, but an exponential relationship! (Ignore the best-fit line, I couldn't get it out of linear mode).
I don't think it takes much creative thinking to see that if we pass some reforms and reduce the number of lawyers interest rates will plunge very quickly. Think of all the costs we can reduce with just a simple bit of legislation. Plus, with the reduction of lawyers, the best educated lawyers from the best schools, those most in demand, can command higher prices. We increase quality and lower costs as a result.
The future for lawyers is somewhat dim anyhow given what the inverted interest rate curve says about the market's view of the future legal market. I'm somewhat surprised the lawyers aren't already clamoring for French-Style legislation of the U.S. legal labor market.