Financial Services Lawyers in Capital Face New Demands on Time, Talents, and Creativity: Banks and Thrifts Look to Their Legal Minds in Coping with Regulation and Competition as They Test How Far They Can Go

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WASHINGTON -- Dennis J. Lehr has a vision of the future. Beyond credit cards. Beyond bedit cards. He ways the future may lie in microchips, maybe even ones embedded in the body.

"It's true fantasy, but imagine a microchip embedded in your calf. All your personal records like health and insurance records could be recorded on it. You could have a line of credit that would allow you to stick your leg in front of a machine somewhere and it would belch out yen to you. Too far in the future? Maybe not."

Who is this crazy dreamer? One of Washington's top banking lawyers.

The attorney with Hogan & Hartson said that, to his misfortune, few clients are willing to pay him for such wild fantasizing. "If they would, you'd get the invitation to my retirement party tomorrow," he said with a grin. But dreamer or not, Dennis Lehr is proof that banking lawyers are no longer merely walking legal papers through federal agencies for approval of new branches. Instead, they are formulating end runs around regulators and helping their clients break through the old lines of commerce.

This article is a look at the Washington lawyers who specialize in representing financial institutions. It cannot be all-inclusive -- Washington has about 35,000 lawyers, and many have at one time or another represented a financial institution in a contract negotiation or before a federal agency. Although the Federal Bar Association does not keep statistics on its members' specialties, the head of the financial institutions and economy section estimated that roughly 2,000 attorneys belong to that subsection, representing clients involved with banking, thrifts, securities firms, and housing.

So to find out about Washington's Financial lawyers, we discussed the topic with sources in federal agencies, trade associations, and on Capitol Hill, then met with a cross section of the city's best-known financial institutions attorneys to talk about the nature of their practice.

All the lawyers interviewed chuckled at the notion that the federal government has deregulated banking.

"What has passed for deregulation isn't. Really, it's just the elimination of interest-rate ceilings," said John D. "Jerry" Hawke, the chief banking lawyer for Arnold & Porter, one of the city's most prestigious law firms. Mr. Hawke, who was general counsel for the Federal Reserve Board from 1975 to 1978, teaches classes in financial institutions law at Georgetown University and is considered the dean of financial institutions law in Washington. He has represented banks in some of their most significant challenges to regulation and geographic restrictions.

Although deregulation of airlines and trucking dried up work for lawyers in those industries, the so-called deregulation of financial institutions has instead led to an era of growth for law firms.

At Arnold & Porter, about a quarter of the firm's 200 lawyers are working on banking matters. "Ten years ago it was just me," Mr. Hawke said. He does not foresee any major cutbacks, he said, because banking law "is a supercharged

political issue and will always be, because it's an area where politics are very important." He does not expect what happened to the airline and trucking industries to happen to banking. "The amount of enforcement activity is actually going up," he said.

Other attorneys agreed.

"Deregulation is a joke," said Mr. Lehr of Hogan & Hartson. "Congress treats us to a nice, thick piece of legislation almost every session." S&Ls Offer More Business

Neal Petersen followed Mr. Hawke as general counsel at the Fed, then left in 1981 to join the Washington office on Manatt, Phelps, Rothenberg & Tunney, a large Los Angeles firm. He said he "hasn't seen any decrease in regulation since deregulation.

"It isn't really deregulation," he said. "It is shifting the fence lines where we are fighting. …