THE WALL STREET JOURNAL CONFIRMS: YES, IT IS A WALL STREET BAILOUT

Yes, it is a Wall Street bailout—a bailout for Wall Street, first and foremost. But don’t take my word for it. Trust the hometown newspaper, The Wall Street Journal, to provide the scoop. According to one informed estimate, the same Wall Streeters who got us into this mess could make another $100 billion for their help in “cleaning it up.”

The role of lobbyists, descending on the $700 billion—oops, make that $850 billion, including additional earmarks—bailout bonanza has been much reported on. Sample headline in The Hill newspaper: “With bailout passed, lobbyists look to get in the game.” The paper quotes Rich Gold, head of Holland and Knight’s government relations and regulatory practice, declaring, “This is going to be a big trend, in all honesty, for the next three to five years.” And outside-the-beltway birds of prey, too, are circling overhead, including Rudy Giuliani. The likes of Gold and Giuliani might look forward to making millions. But the real money, denominated in billions, is to be found back on Wall Street.

Let’s get right to the Journal: an article by Deborah Solomon and Aaron Luccheti in Tuesday’s edition. Here’s the lede: “The Treasury Department, seeking to jump-start its $700 billion rescue, is giving financial institutions two days to submit proposals to work as asset managers for the program. Treasury's request for proposals makes clear that it wants large, established firms with significant assets to work for the government's program to buy mortgage-backed securities and other distressed assets.” [emphasis added, all bolds to follow are mine]

In other words, the big get bigger. The Journal continues: “To qualify, institutions must already manage at least $100 billion. Firms that want to manage whole loans, such as residential and commercial mortgages, must already oversee at least $25 billion in such loans or prove that they have capacity to handle that much…. Market observers say there are just a handful of firms that could handle such a large portfolio of assets.”

So this is not for the little guy. And the big guys will apply. The Journal explains: “Since plans for the bailout plan were announced, a range of firms—from large investment banks to boutique real-estate companies—have been angling to grab some of the advisory business. Many are hungry for this work because their sales, financing and other traditional forms of real-estate business have dried up with the credit crisis.” Translated, this means that Wall Street firms, having destroyed their own nest, are now looking to Uncle Sam to re-feather it for them.

Some of the big companies mentioned by the Journal include Pimco, Blackrock, Legg Mason, J.P. Morgan Chase, and Morgan Stanley. “There are so many people who need something to do,” says John Douglas, former general counsel of the Resolution Trust Corporation (an earlier government bailout outfit, which disposed of $394 billion from 1989 to 1995), who is now a partner at the law firm of Paul Hastings Janofsky & Walker.

The Journal provides a look ahead into the new enterprise, now being sketched out behind closed doors in Washington and New York: “The asset managers will have significant power… the institutions are expected to assist Treasury in determining which assets to buy, when to buy them and whether to sell or hold them.”

Mallory Factor, a businessman in Charleston, S.C. with a background in New York finance, estimates that costs, fees, and expenses—to myriad advisers, lawyers, consultants, rating agencies, as well as money managers—associated with the bailout could total as much as one percent a year. One percent of $700 billion is $7 billion; if we multiply that over five years, that’s $35 billion. “But I think this will go higher than $700 billion, to easily more than a trillion,” Factor told me. “And the cleanup process could last a decade.” If so, then fees for Wall Streeters could easily hit $100 billion.

But that’s not all. As the Journal further explains, “One of Treasury's biggest hurdles will be handling conflicts of interest that are likely to arise. Companies that qualify for Treasury's program are likely to have a financial stake in the very assets they will be charged with buying and selling.”

That’s known as a conflict of interest, and oftentimes, folks who violate their fiduciary responsibility end up paying a fine, or even going to jail. But not anymore. In this Paulson-ized new world, it is understood that conflicts of interest come with the territory. As the Journal puts it, “Treasury doesn't expect to eliminate all conflicts of interest, but is hoping to minimize them, according to a person familiar with the matter.” Got that? The Department of Treasury will do everything it can to “minimize” conflicts of interest.

So now we know. Lobbyists and fixers will make millions, and Wall Streeters, even those with unclean hands, will make billions. We are looking at a bull market in morally hazardous profiteering. It’ll be a great time to be a muckraker, too—but the Wall Streeters, having written the rules that require them only to “minimize” their conflicts of interest, will just shrug off the criticism.

Once again, they will go laughing all the way to the bank. But of course, they’ve been there before.