Wall Street Decamps to K Street for Work on Bailout
Saturday, November 8, 2008
For the past three years, Larry Wolk commuted four days a week on the Acela train from his home in Potomac to New York, where he drew up contracts and loan documents for multimillion dollar real estate deals.
But with the New York real estate market suffering, his business has come to a standstill. So instead of commuting to New York, the Holland & Knight attorney is now driving to his firm's office on Pennsylvania Avenue where he's part of a new team that's advising clients on how to deal with the federal government's $700 billion bailout plan.
Wolk is in the vanguard of an army of accountants, financial advisers, asset managers, lobbyists and others descending on Washington as part of the government's attempts to rescue the economy and bail out industries.
Big consulting firms like PriceWaterhouseCoopers and Ernst & Young have booked extended-stay apartments and blocks of hotel rooms. Out-of-town financial experts are scouting for office space, expecting to lease it for several months as they help do work for Treasury and others.
Commercial real estate brokerage companies have pulled lawyers and salesmen who usually put together deals on downtown offices to work out loans and foreclose on properties. Some have dubbed themselves the "TARP team" after the Treasury's Troubled Asset Relief Program created to sort through assets.
"Everything from the policies, the regulations, to the money and the contracts to do the work will be emanating out of Washington, so people want to be here," Wolk said. "Wall Street has moved to K Street."
National crises often provide a stimulus to the Washington economy. The Resolution Trust Corp., the agency created to sell off troubled savings and loan properties in the early 1990s, alone employed 7,409 people at its peak in 1992. After the Sept. 11, 2001, attacks, the government poured billions of dollars into defense and homeland security spending that set off a frenzy of government contracting, creating 105,000 new jobs in the region from 2003 to 2005.
A new surge is underway now as the government mobilizes its response to the current financial crisis.
"Firms see this as a potential gold mine," said Anirban Basu, an economist and chief executive of Sage Policy Group in Baltimore. For Washington, "that has to translate into business sales, high-powered restaurant meals, business suit purchases, and travel and luxury hotel stays. We often talk about D.C. being different economically than the rest of the country and this is perfectly true. I don't see much evidence of a slowdown here."
Marriott International's ExecuStay program, which rents apartments to business travelers for weeks or months at a time, is one beneficiary. PricewaterhouseCoopers and Ernst & Young -- two big financial advisory companies that have been chosen by Treasury to do bailout work -- have booked dozens of units at Marriott's 52 properties in the region, paying about $4,500 a month per apartment.
Young Hill, general manager of the D.C. region for Marriott ExecuStay, said she's had auditors coming in "to look at Fannie Mae staying with us, but that was nowhere near as big as this financial bailout mess. This is huge." PriceWaterhouse told Marriott it would likely need to bring 300-plus people into the area and "they know they're going to be here for a while," Hill said. Some guests may stay for a few days, other for months.
She said many of the contracted Treasury employees staying at her properties work 12- to 14-hour days and often leave their orders for Giant's Peapod grocery delivery with the front desk clerks, instructing them to let in the deliveryman while they're gone. Some of the guests ask for extra sheets, towels and a sleeper sofa on the weekends when their families visit.