Timothy O'Shea reflects on his Duke in D.C. externship

January 28, 2010Duke Law News

Timothy O’Shea JD/MPP ’10 spent his Duke in D.C. externship at the epicenter of financial regulatory reform working for the House Financial Services Committee chaired by Rep. Barney Frank. “I think this is one of the most remarkable legislative pushes that has probably happened in my lifetime,” he says. Working under the committee’s senior policy adviser, O’Shea worked particularly closely with the staff of the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. He offered this mid-October snapshot.

I’ve been working on regulation of hedge funds, credit-rating agencies, derivatives, reform of securitization practices — basically the full gamut of issues that arose from the financial crisis of last fall. I’ve even touched a little bit on the creation of the federal insurance office that is a response not only to the [near] collapse of AIG, but also the terrorist attacks of 9/11. It’s been very exciting work.

A considerable amount of my work relates to credit-rating agencies. They traditionally offer First Amendment defenses when they are sued over the performance of their ratings. I researched that after a district court judge rejected First Amendment defenses offered by ratings agencies in a motion to dismiss after being sued by investors in a special investment vehicle. He gave a few reasons why those defenses don’t work the way they have in the past.

So I did the equivalent of a case note on the issue. The credit-rating agencies were hired by the investment bank to help structure the investments so that it would get an AAA rating. That means the ratings agency is actually working with the issuer and the underwriter — it wasn’t just writing a newspaper editorial. It was part of the team structuring the issuance, not some disinterested analyst. The case pretty well sums up why the government — the Financial Services Committee, at least — is trying to regulate the credit-rating agencies. …

My job is to help prepare for hearings [relating to proposed financial regulatory legislation]. That entails researching an issue — such as private pools of capital — in detail, sometimes looking back at work the committee has already produced, and creating documents that explain the draft legislation, the purpose of the hearing, and the inquiries the hearing is going to make.

… It involves analyzing legislation. I was usually looking into two or three bills sort of simultaneously, seeing how things complemented each other. And because we’re inviting leaders of the industry and relevant trade associations [to review and testify], it gave me a much better understanding of who the relevant players are.

It’s the sort of environment where … you have to understand how everything fits together. I wouldn’t really understand what I was doing on credit-ratings agencies if I didn’t also understand the securitization process and what the challenges are there and what the reform proposals are envisioning. So even if there are issues I am not working on directly, the nature of the work is such that you kind of have to expose yourself to everything a little bit just to make sure that your understanding of your project is complete.