Photo by Dave Cross.
Lary Stromfeld has always been drawn to big challenges, whether it’s setting standards for the global financial markets or feeding 1.4 million hungry New Yorkers.
Shortly after he earned a social science degree from Brandeis University, the Blizzard of ‘78 immobilized the northeastern United States, including the Boston suburb where Lary was employed as a social worker helping senior citizens with housing, healthcare and transportation. The city was shut down for a week; people were stuck in their homes, some without food, heat, or medication. Lary lived near a public works employee so was able to get a ride to Town Hall each day. For 16 hours a day he answered phone calls to help people through the crisis. “It was exhausting and exhilarating,” he says. “I was instantly given discretion and authority to work with local businesses and the civil guard to improvise solutions.”
“Afterward, I discovered that, as much as I enjoyed my job and really wanted to help each client, they were all struggling with the same issues,” explains Stromfeld, now a partner at Cadwalader and a member of its management committee. “I found myself reading Social Security and Medicaid regulations, and realized that it was law and policy that was affecting their lives. I wanted to find a bigger solution. That’s when I decided to go to law school, thinking, frankly, that I would go into public service law.”
Lawdragon: That’s fascinating. So you didn’t grow up wanting to become a lawyer?
Lary Stromfeld: I didn’t. I'm the first lawyer in my family. My father was an accountant and became the CFO at a manufacturing firm in the New York suburbs. It eventually went public, but he wasn’t ready to retire, so he bought an office supplies business in downtown Manhattan, “pre-Staples.”
It was a good small business, with a retail side. He was a fantastic numbers guy, but dealing with customers was not his strong suit. So my mother joined the business, and that made a big difference. Her family had owned a candy store that was the neighborhood hang-out, complete with a sandwich counter that served ice cream sodas. Her mother, my grandmother, was the brains and personality that kept everybody coming back to the candy store, so customer relations was in my mother’s genes, so to speak.
As for me, I went to Penn Law at the end of the '70s and landed a summer job on Wall Street in the legal department of Drexel Burnham Lambert. It was during the financial industry’s go-go years, and I was excited by it all. I discovered that, notwithstanding my liberal arts degree and my interest in public policy, I had a real interest in and acumen for finance, which I inherited from my father. That opened up my eyes.
LD: Did your time at Drexel inspire you to return to Wall Street?
LS: It did. When I graduated law school, I got a job at Mudge Rose in New York, which was known nationally for municipal bond work. For me, financing for public projects - schools, hospitals, housing, infrastructure - was the best of both worlds. I was doing the finance work that I was good at, and I was doing it for public projects.
For several years, I took every opportunity to work for different partners on different types of financings, and I loved everything about it. One late night at a financial printer a group of lawyers I knew and respected told me that they were about to start up the New York office of Orrick Herrington – which at that time only had offices on the West Coast. I joined them as the ninth lawyer in New York. Because it was a start-up, I began to focus on developing business. Unfortunately, the public finance market was hit hard by the 1984 tax law changes and started to contract. As much as I loved what I was doing, I realized that my career would be limited unless I branched out.
LD: It can be challenging to move from having a realization like that to acting on it. What happened next?
LS: I contacted a headhunter friend with whom I’d shared a summer beach rental on Fire Island, in a group house, a couple of years earlier. I told her that I needed to make a move away from traditional public finance work, and that I was interested in complex financings. She suggested that I look into structured finance and derivatives, and said the best firm for that work was Cadwalader.
I got an interview and immediately knew it was the right fit for me. Once I started at Cadwalader, I threw myself into every opportunity to learn as much as I could and retooled myself to be a structured finance and derivatives lawyer. I recently celebrated my 30th year here.
LS: So that was my path from sociology major to derivatives lawyer.
LD: It's fascinating, because so often you find that there is some river that flows through a whole career. There's generally something that ties it together. Tell me more about how your expertise developed.
LS: I went to Cadwalader because it represented most of the major global financial institutions in their derivatives business. Soon after I arrived, state and local governments became interested in doing derivatives transactions in connection with the financing of public projects. This was very fortunate for me because I had spent the first part of my career doing those financings and the next few years doing derivatives. I was literally one of the only people in the country at that time with expertise in both. As a result, I became the lawyer who helped our bank clients understand and start that business, which grew quickly. As I developed the relationships with those clients, they began calling me for other new businesses or financing structures. And so I was able to expand the practice, which is what enabled me to become a partner here at Cadwalader in January 1994. I had a very vibrant practice from the start.
LD: As you expanded your practice, what are some of the deals or other matters you've worked on that were hallmarks?
LS: The first one that comes to mind is the Detroit bankruptcy, because at the time it was the biggest and one of the first municipal bankruptcies in the United States.
I had helped one of our large bank clients do the initial financing with Detroit, to finance its public pension funds. But a few years later the city started to experience financial difficulty, so we restructured the transaction to meet the city’s cashflow needs. In exchange, we took a security interest in the tax receipts the city collects from its casinos – a very stable collateral package. Unfortunately, over the following years, the city’s financial condition continued to deteriorate.
When the city was preparing to file for bankruptcy, the city officials realized that they would not be able to have a successful bankruptcy plan unless they renegotiated access to the collateral they had given us in the prior restructuring. Literally on the eve of the bankruptcy filing, the city's lawyers came to our office to request access to that collateral. We used that bargaining position to renegotiate a deal that put us front and center in the Detroit bankruptcy.
LD: So that propelled your work in municipal bankruptcies?
LS: It did. My team at Cadwalader was already known for our expertise in complex municipal financings, and that put us on the map for handling complex municipal bankruptcies. During the course of the Detroit matter, I was at a charity dinner where I was approached by several people I know in the municipal market about issues they were seeing in Puerto Rico. The island wasn't really on anyone else’s radar at the time. Detroit was still the headline in the municipal finance market.
I came back from that charity dinner and met with several of my bankruptcy colleagues and said, “We need to get as deep as we can into Puerto Rico’s finances and a potential bankruptcy.” So we put together an analysis of what might happen in Puerto Rico. Then we identified from public filings Puerto Rico’s biggest creditor, Assured Municipal Guaranty, a municipal bond insurer that, basically, provides coverage for bonds at risk of default. Assured had about $5 billion of exposure on the island.
So I said, “Let’s go talk to them.” We made a great presentation to them and, clearly, we had thought about all this in a lot more detail and well in advance of anyone else. They hired us, and we continue to represent Assured as the largest creditor in the largest municipal bankruptcy in history, which means it also comes with many complicated political and social issues.
LD: The Puerto Rico example is such a good one of how the skills you’ve acquired during your career, and the initiative you take with prospective clients, has helped generate business.
LS: It’s not just me. I have to recognize and give credit to my partners here at Cadwalader, especially Ivan Loncar, because these engagements are not something one person does alone. That's what I like most about these kinds of engagements, whether it's Detroit or Puerto Rico or the work we are currently doing to prepare for the end of the London Interbank Offered Rate (LIBOR).
This kind of complex work involves many, many disciplines, and Cadwalader just has so many talented lawyers, particularly in the financial markets. Take our representation of the International Swaps and Derivatives Association, for example. When the Dodd-Frank Act was passed in July 2010, everyone knew it would bring sweeping new regulation to the derivatives markets and that it would take months for the new rules to be released. In the meantime, the markets were in a kind of limbo, waiting for the regulatory shoe to drop.
Fortuitously, in a very strange way, that July I slipped and fell in my backyard while playing volleyball with my high school daughter and her friends, tearing my calf muscle in the process. I was laid up for weeks, and I remember thinking, “OK, everybody knows these regs are coming, but nobody quite knows what they will look like. We can't just sit around and wait. There's got to be something we could be doing now.” So, I spent weeks on the phone with the regulatory attorneys at Cadwalader trying to anticipate how the regulators would approach writing rules based upon the same legislation we were all looking at. We then developed a range of alternative scenarios and strategies for dealing with them.
Out of that, we ended up representing ISDA in the development of documentation and policies to address the regulations coming out of Dodd-Frank, and then, ultimately, to address policies around the world as other jurisdictions developed their own rules. We essentially established the framework for addressing the global regulation of derivatives.
LD: That's really incredible. You fell down playing volleyball and you end up advising financial institutions around the world.
LS: Yes, thank you, I guess. There was another project that grew out of that, and actually I'm pretty proud of it as well. You know, the derivatives market is a global market of trillions of dollars, but it's not an exchange. Each individual transaction is based on a bilateral contract published by ISDA. So once we developed the documentation that was needed to address the regulatory changes, all of those bilateral contracts – literally hundreds of thousands – needed to be amended. The scale of that logistical challenge was daunting.
ISDA had previously published template amendments online to address other changes to their form documents. It was a really efficient way of amending documents on a large-scale basis when you had a single amendment for a single issue or provision that needed to be adopted by thousands of market participants.
But our amendments were 100 times more complicated than that, because there were many, many different provisions that needed to be amended and there was a myriad of regulations that we were trying to address. And so we needed to develop multiple forms and options to achieve regulatory compliance and design them in a way that could be efficiently incorporated into hundreds of thousands of contracts.
So, this was another “aha” moment for me. I was literally on my way to a meeting at ISDA's office, walking down Madison Avenue and thinking about what it means to try to amend all these contracts. And I just came up with an idea based on a very simple notion: although we're talking about hundreds of thousands of contracts, really, in the end, we can use the simple contract law principle of “offer and acceptance.”
Because of the scale of the market, we were introduced to a global fintech company. We explained the concept and then helped them design an online system that could accommodate the numerous variations of the documentation that we had prepared, based upon each market participant’s particular regulatory needs and profile. It was the first time such a system had been used in the global derivatives market. It forced us to think about documentation in a different way, to draft the language with a view toward how it could be translated into the logic of binary computer coding. That platform eventually had over 200,000 subscribers.
LD: And then how did your involvement in LIBOR come about?
LS: Concerns about LIBOR had been surfacing for many years, and many banks had settled litigation over alleged manipulation of LIBOR (which is an international benchmark for interest rates). In the summer of 2017, the regulator in London who oversees LIBOR announced that, as of the end of 2021, market participants would have to treat LIBOR as no longer being available. That hit me as a huge challenge.
The notion of LIBOR just ceasing to exist appealed to my intellectual curiosity and became a bit of an obsession for me. I kept thinking about it and talking about it, but with no particular goal or purpose in mind. I even went to the annual conference for the securitization industry – about 8,000 people – just to walk around for two days asking people what they planned to do. I was like a roving reporter with a single question. I learned a lot about the multiple perspectives and impacts that the change would have on various stakeholders in the market. I also got a few strange looks.
It was very early in the process at the Federal Reserve, which had convened a committee – the Alternative Reference Rates Committee – to find a replacement index. The ARRC has about 40 members, roughly 30 market participants of all sizes and types, including banks, money managers, trade associations, etc., and about 10 U.S. market regulators, including the Commodity Futures Trading Commission and the SEC.
Once the ARRC identified a new index to replace LIBOR and was ready to recommend that market participants address the replacement in their contracts, it needed to hire a law firm. I had been talking to so many people by that time - and was also known for my work for ISDA - that I was recommended to the ARRC by the in-house attorneys of the ARRC members. I am proud that they selected Cadwalader to draft the documentation for transitioning from LIBOR to the new index, a $200 trillion global market.
Today, almost two years since we began working with the ARRC and assisting our clients on their LIBOR transition, we are viewed as the go-to firm for the big banks and, increasingly, regional banks and other financial institutions. The LIBOR transition is an enormous undertaking for any financial institution.
LD: That’s great. All the while, you have been able to balance your complex practice with an ongoing commitment to public interest work, specifically Justice Served.
LS: On that one, again, I'm fortunate to have benefited from my colleagues at Cadwalader. Food Bank For New York City is the largest emergency food program in the city, organized 36 years ago as a not-for-profit by my Cadwalader partner, Jack Fritts, who I also consider to be a good friend, a really inspiring man. Over many years, I would listen to Jack talk about the critical work being done by food banks. It all sounded important and necessary, and I regularly wrote donation checks and provided support but was not directly involved in Food Bank’s work.
That all changed when I volunteered to do an event at the Food Bank. Always being client-minded, I mentioned this to a good client and friend – Maria Douvas of Morgan Stanley. She said “Oh, great. Next month is our annual ‘give-back’ month. We're trying to decide what to do.” And I said, “Well, I have an idea.”
So, I chartered a bus to pick up volunteers from Cadwalader and from Morgan Stanley’s legal department, and together we headed up to the Food Bank’s Bronx warehouse for the day. Now, as a lawyer, I spend most of my days in a 12-by-12 foot office. Then I walked into this 90,000 square-foot warehouse with shelves stacked floor to ceiling with food and with tractor-trailers lined up at the loading bays. That moment changed my life.
The thought that went through my mind was not “How big this place is” but, “How big the need must be that this is what is needed to feed hungry people in New York City!” Food Bank leaders really drove home the point, explaining that one in five New Yorkers faces hunger and what I was looking at would only feed them for a few days. I remember turning to one of the lawyers standing next to me and saying, “I have to do something. I can't just walk away and go back to my regular life tomorrow. I have to act on this.” I also knew from my experience as a social worker in Boston that I needed to do something with a bigger impact. I just didn't know what it would be.
LD: You've always looked for these bigger solutions.
LS: I think you're right. With that one, I kept thinking “What can I do? I don't know anything about hunger. I don't know anything about food banks. I don't know anything about the food industry. I don't even know people in the food industry.”
But in talking to people and tossing around different ideas, I eventually came up with the wholly unoriginal idea of using my network to start a campaign within the New York City legal community to help fight hunger. The folks at Food Bank are the ones who coined the name “Justice Served,” which I think is terrific.
That first year, the campaign had Cadwalader and five other law firms and law departments as charter members. This past year, in just our fourth year, we had 24 law firms and law departments.
LD: Congratulations. That's magnificent. Are you proud of it?
LS: Thank you. I am very proud of it. This campaign has really made a difference. We have raised awareness, activated thousands of volunteer hours, and raised enough funds to provide over two million meals in our first four years, and it just gets bigger and more impactful every year. I have to give credit to the people at Food Bank and Cadwalader’s pro bono manager, Annie Mohan, for making it a success.
When I am not doing my “day job,” I'm always thinking about strategies to invigorate the campaign and bring in new members and challenge everyone to do more. I’m also proud that my family has embraced the fight against hunger. One daughter ran the food recovery network at her college, my wife wrote a comprehensive guide on how to run a soup kitchen, and we have an annual family event for our local food pantry.
LD: I also remember so well you talking about how much the in-house attorneys at different financial institutions wanted to get involved, which is very cool.
LS: What the Justice Served campaign highlighted for me is that a really valuable and under-appreciated way to develop relationships with clients is through shared values. When I approach clients that I work with every day on all kinds of financings and legal issues and say, “Hey, let's do something to fight hunger in New York City,” I don’t feel like I’m asking them for a favor; rather, I’m offering them an opportunity to share something that is incredibly meaningful. And they appreciate that.
For me, that’s just a perfect day: working side-by-side with clients who have shared values to tackle complex legal matters and make a difference in our community.