Another $11 million in legal work

The Treasury Department has hired two law firms to work on a key part of its financial-industry rescue program -- the purchase of preferred stock in U.S. banks. The contracts have an initial term of six months and are worth $5.5 million per firm.

Hughes Hubbard & Reed LLP of New York and Squire Sanders & Dempsey LLP of Cleveland were chosen for the work.

Once again, the Treasury Department offered few specific details about its deals with the law firms. It redacted the price quotes in both the Hughes Hubbard contract and the Squire Sanders contract, and gave no information on the number of employees covered by the deals or the total number of hours they would work.

Although the Treasury Department is allowed to keep some propriety information confidential under federal privacy rules, the lack of specifics in the new contracts would seem to fall short of the transparency promised by those running the bailout program.

The most specific piece of information in the documents is the note that the firms will be responsible for handling between 4,000 and 8,000 transactions under the government's $700 billion Troubled Asset Relief Program, or TARP.

It's possible that taxpayers are getting a bargain from the firms. Another law firm, Simpson Thacher & Bartlett LLP, signed a contract with the Treasury Department last month to provide advice on its purchase of preferred stock in U.S. banks.

That six-month contract was worth $300,000. And although the hourly rates the firm is charging the government was blacked out in the copy of agreement made public, the number of hours listed in the document suggests that taxpayers got a better deal than the firm might have charged its private sector clients.

The contracts with Hughes Hubbard and Squire Sanders were signed Oct. 29 and run until April 29 of next year. A Treasury Department said it approached five law firms about doing the work, and got bids from four of them.

A check by BailoutSleuth shows that neither Hughes Hubbard nor Squire Sanders has extensive ties to the banks and other financial-services companies that are likely to be the main beneficiaries of the Treasury Departments's recsue program.

A Hughes Hubbard partner, James W. Giddens, recently became the court-appointed  trustee in the bankrutpcy liquidation of Lehman Brothers Inc. He was appointed at the requests of the Securities Investor Protection Corp. Hughes Hubbaard also was hired as counsel to the trustee.

Squire Sanders has dones legal work for Keycorp, a Cleveland-based bank that is slated to receive $2.5 billion in capital from the Treasury Department.

Squire Sanders also has been active on the European side of the financial crisis. It is advising an Icelandic bank, Landsbanki, whose United Kingdom arm has been put into receivership by British regulators.

Under their Treasury Department contracts, Hughes Hubbard and Squire Sanders will  review investment agreements for potential problems, work with the government and the banks to resolve any issues and then conduct the closing of the transactions.

The Treasury Department plans to use as much as $250 million of the $700 billion in bailout funding to inject capital into banks through the purchase of preferred stock and warrants to buy common shares.

The government has already granted preliminary approval for more than $160 billion in investment in roughly 40 banks.