Wall Street Decamps to K Street for Work on Bailout

By Dana Hedgpeth
Washington Post Staff Writer
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.

"It seems the whole world is interested in what's going on with the bailout," Hill said. "Usually this is the slowest time of the year for our business, but now it is like the floodgates opened. We've got wait-listed people."

Andrew Smith, president of Houlihan Smith & Co., a specialty investment banking firm based in Chicago, said he's talking to local real estate agents about opening an office in the District for possibly as many as 50 of his employees to use over the next two years if the firm lands part of a contract to help the government sort through troubled assets.

"There will be people within Treasury who will want regular, real-time information and updates," Smith said. "Much of that can be done via phone, but in the end, our business is a people business. It is important to be accessible to the people you're working for."

For the past month, Smith, whose 135-person firm also has offices in Los Angeles and New York, said he's been focused on landing business in Washington. He's been working 10-plus hours a day and half a day on Saturdays to help put together a 50-page sales pitch to the Treasury and the larger consulting firms that the government has hired to get work valuing assets.

"It's an excellent business opportunity," Smith said. "We're prepared with the proper skill sets to jump in. We have laptops and BlackBerries. We could set up in a weekend's notice."

Holland & Knight said it has received inquiries from companies like Houlihan & Smith as far away as the West Coast and Georgia who are also contemplating setting up shop in Washington.

"This has become a cottage industry," said Steven B. Nesmith, the lead government lawyer who specializes in mortgage finance work on the Holland & Knight TARP team.

In Bethesda, Charles Hopkins said he's hoping to make up losses he's seen this year at his 10-person financial management and investment advisory firm called Corporate Finance Services by landing a subcontract from larger companies that are doing work for the Treasury.

He's accepted 50 résumés, from unemployed Wall Street bankers, derivatives specialists, financial analysts and recent MBA graduates looking for jobs, and he is considering leasing an office downtown to be near the Treasury. "It could be a tremendous opportunity for us," he said. "The situation isn't going away soon. If we could grab ahold of a subcontract that could be fortuitous. It's tantalizing."

The financial crisis team at one District law firm -- Akin Gump Strauss Hauer & Feld -- sends out almost daily e-mails and holds conference calls and helps with online seminars offering advice to troubled companies that have come under congressional investigation, including Countrywide, Moody's and American International Group. A recent online discussion was titled: "Who's Going to Court, Who's Going to Jail?: Civil and Criminal Law Enforcement in the Wake of Financial Crisis."

With rates starting at $300 an hour, Huron Consulting Group, a Chicago-based financial management and consulting firm, said it counsels banks and mortgage companies with distressed assets on how to navigate TARP and the bailout.

"Things are moving very fast," said Tim Hart, a vice president at Huron, which has 1,500 employees across the country with about three dozen focused on the bailout and economic crisis. "Regulations are coming out. People are trying to sort through it, and they're asking us to do financial modeling of their balance sheets. What are the impacts if you're a bank or an insurance company considering taking money from TARP?"

For Smith, who runs the niche investment banking firm in Chicago, the financial crisis could mean a stay in Washington and last several months.

Already, his wife and two teenagers assume they'll spend the spring visiting him at a hotel in the District if he lands the business.

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