News & Politics

Surprise! Lobbyists and Lawyers Will Be Winners

Bailout winners and losers.

It was a fairy tale brought to life: Wall Street had been trapped in a dungeon by evil mortgages, and it was up to Washington to save them. Legislators, lobbyists, and administration officials struggled to slay the dragons of bad debt while being hailed as the only ones who could save the day.

President Bush, Treasury secretary Henry Paulson, and Fed chair Ben Bernanke warned that the entire financial system would grind to a halt unless Congress spent hundreds of billions of taxpayer dollars to buy distressed loans from banks—even as the government seized two of Washington’s biggest institutions, Fannie Mae and Freddie Mac.

Here are some winners and losers from the financial crisis:

Local Winners


During intermission in Wolf Trap’s Sunday-matinee performance of Les Misérables, Scott Talbott—chief lobbyist for the Financial Services Roundtable, which represents some of the nation’s largest banks—had to leave his pregnant wife alone in her seat so he could join a conference call with the Treasury Department to learn more about the takeover of Fannie Mae and Freddie Mac. It was the first of many such calls.

Talbott, along with other financial-industry lobbyists, worked overtime to shape the government bailout. As Congress negotiated over the rescue plan, Bruce Josten, executive VP for government affairs at the US Chamber of Commerce, focused on talking to reporters to get the chamber’s perspective out.

As Talbott and Josten waited to find out how they’d do, lobbyists at the American Bankers Association were already celebrating—they got the government to add a provision limiting its insurance on money-market accounts to money already invested after a push by Wayne Abernathy, executive director of regulatory affairs for the ABA.

Law Firms

While the rest of America settled in for a further slowdown, DC lawyers geared up for a golden time—at least in the short run. Although many firms will likely see a long-term loss from the collapse of Wall Street titans, untangling the messy collapses and takeovers will be an immediate plus. “It’s going to be a tsunami,” says Joe Hoffman, head of the business group at the law firm Kelley Drye. Anticipating new levels of financial oversight and banking regulation, Hoffman says his clients—mostly financial institutions—are going to need a lot of help navigating the new terrain.

Consultants also have found their services in demand. “We’ve got more business than we can shake a stick at,” says former FDIC chair William Isaac, head of the Secura Group. Alexandria-based banking consultant Bert Ely says he’s been getting calls from reporters he hasn’t talked with since the savings-and-loan crisis of the 1980s.

Johnny’s Half Shell

As lawmakers, Treasury officials, and lobbyists descended on Capitol Hill to hammer out a deal, the neighborhood’s restaurants started working overtime. “They’re over here renting rooms, huddling up, whispering, doing big things,” says John Fulchino, co-owner of the seafood restaurant Johnny’s Half Shell.

Over at the closest Pennsylvania Avenue Starbucks, manager Carl Banks was serving an average of 100 more people a day. “A lot of assistants come in and get eight or nine specialty drinks and bring them back to the office,” he says.


On September 18, just days after Lehman Brothers filed for bankruptcy, Washington Post Company–owned Kaplan sponsored an MBA fair in Washington for people interested in applying to business school—and it drew a crowd 20 percent bigger than last year’s. “There’s a lot of interest in going back to business school in the DC area,” says Jennifer Kedrowski, a director of business programs at Kaplan. That means more business for the test-prep company. Nationwide, she says, there’s already a 7-percent increase in GMAT test takers this year.

Executives at Veritas Prep—an MBA-prep and consulting company that also has a strong local presence—joked that they had engaged in some “morbid accounting” by adding up at least a dozen new customers with Lehman Brothers e-mail addresses. According to the company, local GMAT-prep enrollment for the last week of August through the third week of September was up almost 50 percent from the same time last year.

The desire to escape the troubled job market also benefits local graduate schools. Reena Aggarwal, professor of finance and former deputy dean of Georgetown University’s McDonough School of Business, says the school had already seen a spike of about 20 to 25 percent in applications for this fall.

Robert Reich

After Treasury announced it would bail out AIG, the Bill Clinton–era Labor secretary was flooded with calls from members of Congress, reporters, investors, and union heads. “They were all asking, ‘What’s going on and what should be done?’ ” says Reich, who now serves as an economic adviser to Barack Obama.

For Reich, the controversy provided a way to focus attention on the need for greater regulation of financial institutions. “From Ronald Reagan onward, the public has been sold on the notion that the government is the problem, and yet now we are seeing that private markets don’t function well unless the government is a watchdog,” he says.

Ron Paul

Texas congressman Ron Paul, whose libertarian roots made him a surprisingly strong candidate in the Republican primaries, has long spoken out against the dangers of a growing national debt. He now is finding a lot more support for his ideas. He was one of the first members of Congress to react negatively to the proposed rescue effort, and he grilled Fed chair Bernanke when he testified before the Joint Economic Committee.

Local Losers

Loser: The Half Street project involved Lehman. Photograph by Chris Leaman

Chris Cox

Carly Fiorina, former chief executive of Hewlett-Packard and now a John McCain adviser, called SEC head Cox “asleep at the switch” as the financial crisis began to unravel. A few days later, McCain said he would fire Cox for betraying the public’s trust. Cox quickly became the public scapegoat for Wall Street’s woes.

Then, in the midst of congressional debate over the $700-billion bailout plan, the SEC inspector general released a report saying that under Cox the SEC had “failed to carry out its mission in its oversight of Bear Stearns,” which collapsed in March.


Several lawmakers earned praise as they encouraged colleagues to support the bailout proposal. Senator Chris Dodd was dubbed the “wonk stud du jour” by the media gossip site Gawker. Representative Barney Frank, one of the first lawmakers to suggest an independent panel to oversee Treasury’s rescue efforts, was featured in a Washington Post profile highlighting his initiative and colorful style.

The fizz faded when the first House vote defeated the bill, triggering 9-percent declines in stock-market indexes. Bloggers and commentators jumped on Speaker Nancy Pelosi for making what was characterized as a political speech just before the House vote. GOP leader John Boehner took flak from both sides—both for supporting the bailout and for not managing to get his colleagues to pass it.

Local Charities

For Mary Funke, executive director of N Street Village, a shelter for women, the bailouts and bank takeovers couldn’t have come at a worse time. She was in the midst of preparing for a Fannie Mae–sponsored walkathon scheduled for the Saturday before Thanksgiving, which raised $250,000 last year—a good chunk of the shelter’s $3-million annual budget. National and local banks and other corporate sponsors have been slower to offer financial support this year. “I think they’re waiting to see how their companies are going to shake out,” says Funke.

Together, Freddie Mac and Fannie Mae give far more—some $40 million—than any other source to local nonprofits, says Chuck Bean, executive director of the Nonprofit Roundtable. “If they suddenly disappeared, there would be scores of unmet needs,” he says.

The Class of 2009

Joe Foster, a second-year student at the University of Maryland Smith School of Business, says his classmates feel nervous. “People are looking for more commitment [from employers] right now, even if it means taking less money,” he says.

Murat Tarimcilar, associate dean for graduate programs at George Washington University, says his school’s career center is urging MBA students with a focus on finance to select a backup field. Because the school’s curriculum emphasizes globalization, he’s encouraging students to consider financial jobs in Mumbai or Tokyo while they wait for the US job market to make a comeback.

Georgetown’s Aggarwal tells students to look more closely at government contractors with large area operations, such as Lockheed Martin and Raytheon. Several students with offers from Lehman Brothers and Bear Stearns already had them withdrawn, she says.

Real-Estate Developers

When it filed for bankruptcy, Lehman Brothers was partnered with Washington-based Monument Realty on 15 area real-estate projects. The investment bank helped Monument develop the Odyssey, a luxury condo in Arlington, and Half Street, a shopping center along with condos and office space near the new Nationals Stadium. Monument quickly affirmed its commitment to funding the ongoing projects.

Other developers have been hurt by the credit crunch. “There’s no capital available to move projects forward,” says Richard Bradley, executive director of the Downtown DC Business Improvement District.

Who do you think are the bailout winners and losers? Sound off in the comments!

This article first appeared in the November 2008 issue of The Washingtonian. For more articles from that issue, click here.  

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