Simpson Thacher & Bartlett LLP may have been making the best of a bad situation by agreeing to advise the Treasury Department on its investments in U.S. banks. The firm has lost two of its best bank clients in the last month, Wachovia Corp. and Washington Mutual Inc., but the Treasury mandate allows Simpson to take a high-profile role in the restructuring of the U.S. banking industry.

The government asked six firms to bid on the $300,000 contract, including Simpson; Cleary Gottlieb Steen & Hamilton LLP and Davis Polk & Wardwell. Those firms, along with Sullivan & Cromwell LLP, Wachtell, Lipton, Rosen & Katz and Skadden, Arps, Slate, Meagher & Flom LLP, have been the most active in the bank and financial institution deals over the past two months. Wachtell and Davis Polk already advised Treasury this fall, the former on the government seizures of Fannie Mae and Freddie Mac, the latter on the American International Group Inc. bailout.

Simpson's assignment is prestigious but not lucrative. The nine-page contract contemplates that the firm will bill 564 partner hours; 376 of counsel hours; 1,692 associate hours; and 1,128 paralegal hours. The $300,000 the firm may charge is one-quarter to one-fifth of the amount Simpson would collect from a private client for the same work.

The contract names six Simpson partners as "key personnel." In addition to Lee Meyerson, its leading bank M&A lawyer, they are: M&A partners William Dougherty and Sean Rodgers; asset-backed securities partner David Eisenberg; financing partner Brian Steinhardt; and bank regulatory lawyer Gary Rice, who spent the first three years of his career at the Federal Reserve Bank of New York.

Simpson will have to forgo assignments that might conflict with its work for Treasury during the six-month mandate, which ends April 9, and for as much as a year later. But because Wachovia and WaMu are gone, the opportunity cost of working for Treasury may be modest for Simpson, which might also face a conflict if one of its private equity clients, such as Kohlberg Kravis Roberts & Co. or Blackstone Group LP, wants to invest in a bank. In the longer term, Simpson will be able to tout the assignment to prospective clients.

In contrast, Wachtell is representing Bank of America Corp., Morgan Stanley and Wells Fargo & Co. on recently announced transactions, while Sullivan has long advised Goldman Sachs Group Inc. and represented J.P. Morgan Chase & Co. on its acquisition of much of WaMu. Davis Polk, Skadden Arps and Cleary Gottlieb represented Citigroup Inc. on its failed bid for Wachovia.