The financial crisis destroyed many companies. But it also created an opportunity for others. In fact, mopping up the economic meltdown has been big business.
“The same way there are recovery firms that specialize in fixing up residences after there have been floods or fires,” says Stanford law professor, “there are law firms and accounting firms and turnaround firms that specialize in going into corporations and helping them get back up on their feet and fix the mess,” says Grundfest.
The government’s Troubled Asset Relief Program was created to fix the mess. But the experts from private industry were needed to make it work.
“Pretty much the full range of imaginable financial professionals found a way to profit from the disaster of 2008,” says Damon Silvers, who served as the deputy chair on the Congressional panel overseeing TARP.
The government hired banks to help manage TARP and sell shares of General Motors.
But lawyers led the pack in the niche post-crisis industry.
“I’ve been amazed just at the size of the legal bills,” Silvers says.
But the billing can’t last forever. Prominent law firm Weil, Gotshal & Manges handled the Lehman Brothers bankruptcy, earning millions of dollars on the account. But the Lehman work is winding down, and the firm says it will lay off 170 people, which is nearly a sixth of its workforce.
The Lehman account helped spare Weil some of the pain that other law firms endured during the recession.
Between 2008 and 2010, “firms simply were not hiring. They were not hiring young lawyers. They weren’t making partners,” says legal consultant Kenneth Young. “Big firms are being much more cautious about who they make partner, so if there is another meltdown, they’ll have that many fewer partners to deal with.”
While bankruptcy and securities attorneys found work as part of the crisis clean-up crew, Silvers says the government didn’t hire enough of a different kind of lawyer: prosecutors.
“There’s been a persistent problem here that there have been inadequate legal resources directed toward enforcing our nation’s securities and bank fraud laws.”
So far, no executive has gone to jail for his or her role in the meltdown. And even though some firms, like Weil, are feeling the withdrawal effects five years after the crisis, Silvers says the clean-up industry is expected to be in business for years to come.
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