(Photo above, and caption “Mayor Michael R. Bloomberg argues that the financial crisis makes it important that he remain in office” from today’s New York Times.)
At last week’s abrupt and rushed City Council hearings on whether term limits should be modified in the name of “billionaire exceptionalism,” we testified about the Bloombergian claim that exceptions must be rushed through because Mr. Bloomberg is supposedly specially qualified to lead the city during the Wall Street Financial crisis.
Bloomberg’s Qualification to Lead in Financial Crisis? Noticing New York’s Scepticism
Our testimony on this:
Mr. Bloomberg has told us that he is uniquely equipped to help the city during the current Wall Street financial crisis (only as mayor). We disagree.What did we mean? (I was limited to two minutes to speak at the hearing. Talking fast that was basically eleven, mostly short sentences.) We will flesh it out here. We quote the following from the New York Times:
Warren Buffett, George Soros and Felix Rohatyn were among those who offered warning about the financial crisis before it started unfolding. We are not aware of Mr. Bloomberg offering any similarly prescient or unique warnings.
George Soros, the prominent financier, avoids using the financial contracts known as derivatives “because we don’t really understand how they work.” Felix G. Rohatyn, the investment banker who saved New York from financial catastrophe in the 1970s, described derivatives as potential “hydrogen bombs.”(See: The Reckoning: Taking Hard New Look at a Greenspan Legacy, By Peter S. Goodman, October 8, 2008)
And Warren E. Buffett presciently observed five years ago that derivatives were “financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.”
Like Giuliani, Critical Blindness in Claimed Area of Expertise
If you want to lead in this crisis, we think it matters if you are able to see the problems coming. Especially if it is the area of your presumed expertise.
In the longer written testimony we submitted, we observed that “despite his place atop the pinnacle of so much information” (as mayor of the financial capital New York and the owner of a media company whose business it is to specialize in the dissemination of financial information), Mr. Bloomberg was not able to see the crisis coming.
Previously we observed:
We are not swept up in the rally-around-and-keep-our-current-leader-in-a-time-of-unfolding-crisis campaign. The premise was rejected when it was suggested that Giuliani be specially held over in office after 9/11. We similarly reject that the Bloomberg, who took office when Giuliani cleared the way, should be kept because of the Wall Street crisis. Giuliani, who did not foresee the likelihood of another attack on the World Trade Center, built his emergency command center in the Trade Center, where it was destroyed in the second attack. Bloomberg did not foresee the current foreseeable Wall Street crisis. As a Wall Street insider he is likely less fit, rather than more, to have perspective on the unfolding events.(See: Wednesday, October 1, 2008, Coming to Terms With Mistakes)
Noticing New York Asks for, Doesn’t Get, Proof of Bloombergian Financial Perspicacity
Maybe we would have more patience with Mr. Bloomberg if we, ourselves, had not clearly seen the crisis coming.
We thought we needed to be fair to Mr. Bloomberg. Perhaps he’s had some foresight we didn’t know about. Noticing New York contacted both Bloomberg, LP and the Mayor’s Press Office and asked for a quote with an associated date wherein Mr. Bloomberg warned, in advance, about what was coming. You would think that any Bloomberg spokesperson would be eager to get such quotes out to the public. Especially since a vote was being rushed to the City Council, legislating billionaire-term-limits-exceptionalism into the City Charter predicated upon Bloomberg’s special claim of expertise.
Notwithstanding the imminence of the vote, Noticing New York has not heard back from any Bloomberg spokesperson with any such quote. Doubtful that one exists.
Claim of Financial Expertise Mantle as Reason for Third Term is Bogus
The whole claim that financial industry expertise is the reason Bloomberg thinks he should stay is bogus anyway. We previously quoted Clyde Haberman on this subject.
In fact, he was thinking and winking about a third term well before the Dow Jones charts started looking like the EKG of a heart attack victim.(See: Back When the Mayor Loved Term Limits, October 20, 2008)
Bloomberg as Crisis-insider Lacking Perspective?
But let’s, consider for a moment that some special qualifications with respect to the handling the financial crisis may be in order. We have previously written that instead of Bloomberg being specially qualified in a good way to handle this crisis: “It may be the reverse because, as a crisis-insider, he likely lacks perspective.” (See: Wednesday, October 15, 2008 Self-Congratulation “Befalls” a Man Who Would Know No Limits)
Misguided Preoccupation With Wall Street Leads to Bad Bloomberg/Doctoroff Urban Design
We have seen a lack of Bloombergian perspective on Wall Street from an urban planning perspective.
Back in December 2007, in a letter of comment to the Metropolitan Transportation Authority we reviewed the competing proposed designs for the Hudson Yards project. In our comments we worried about the Bloomberg administration’s misguided priorities in selecting what should have been the best design for the very important, very big project that will define a newly-to-be-constructed area of West Side Manhattan: Built over rail yards (unlike Atlantic Yards, which is only 40% so), the Hudson Yards project will fill in a section of the urban fabric and street grid. We worried that because of mistaken presumptions about Wall Street, the Bloomberg administration would be attracted to one of the worst proposed designs, the Tishman Speyer proposal. Huge building floor plates, (something for which downtown Brooklyn has recently been rezoned) do not make for good urban design. We were worried that Bloomberg would sacrifice good urban design for phantom financial center growth.
Our concern about Bloomberg misguidedness was well-founded (as were our concerns about projecting reliable Wall Street growth). We thought, as did the general public, that the Brookfield Properties proposal was clearly the best proposal for Hudson Yards and that the somewhat similar Related Companies proposal was the second best. Notwithstanding, the Tishman Speyer proposal was selected, very likely due to pressure from the Bloomberg administration and its attraction to large floor plates. Brookfeild dropped out of the bidding under somewhat suspicious circumstances to focus on another nearby project with which they would need help from the city. In the end, Tishman could not fulfill its bid obligations and the development rights were awarded to the Related Companies instead.Here is what we wrote in our December 10, 2007 letter:
Floor Plate Sizes. I know that floor plate sizes have been discussed as a matter of importance. The Tishman proposal seems to make them important above all else. That is one reason their result is so intimidating. I gather that Doctoroff may be preoccupied with the subject in terms of New York competing with London as a financial center and the theory that there may be a continuing growth in the need for sizable trading floors (That is not necessarily my own bet)(See: Wednesday, July 23, 2008, Hudson Yards: Review of Development Proposal Designs)
Lack of Perspective: What We Learn about Crisis-insiders as the Financial Crisis Unfolds
What we have swiftly learned from the unfolding of the financial crisis is that crisis-insiders are not our optimal guides in wending our way through it. We have seen this with the progress of the Wall Street bailout packages, the several initial iterations of which are now, only weeks later, almost universally acknowledged to have been highly inadequate and off-the-mark. Why? Because they were initially designed with a misguided focus on Wall Street and what would be best for Wall Street and not what would work or be best for the rest of us. (Personally, we weren’t surprised when the stock market continued to go down and the credit markets continued to freeze up.)
Yesterday there was an excellent discussion of this on the Brian Lehrer show with Naomi Klein as guest. (Capitalism's Disaster, Naomi Klein, Canadian anti-globalism activist and the author of The Shock Doctrine: The Rise of Disaster Capitalism, reacts to the global financial crisis.)
Although she is an activist with more-than-abundant skepticism of the good motives of the wealth/power establishment, Ms. Klein provided an interpretation of the problem with the structure of the Wall Street bailout, which are quickly becoming mainstream conventional wisdom. She frequently points out how crises are often used to push through policies that inappropriately benefit corporate interests at the expense of the greater public. Accordingly, she was suspicious of the rushed Wall Street “rescue.”
Ms. Klein suggested (6:30 in the program) that the original Paulson rescue plans opposed by the public, (both the 3-page plan and the one that finally passed), were “primarily focused on buying debts and distressed assets, essentially moving the crisis from New York to Washington so the debts could detonate on the public books.” She said that he public’s initial visceral objections to the plan, despite a lot of condescension to their views, were “proven right.” She said the "economic profession has overwhelmingly said that this was a bad idea" and that the European model proposed by British Prime Minister Gordon Brown of a direct infusion of equity to encourage lending was better. She said that we were lucky in that because of the delay and negotiation occasioned by the public objection there was ultimately a small clause that allows the federal purchase of equity in the banks to infuse capital.
She said the deal negotiated by Paulson was still a bad deal, noting that the Financial Times agreed with her on this point. This is clear if you compare the deal with what Gordon brown did five days earlier, negotiating the benchmark of what you can get in exchange for equity. Gordon Brown negotiated (quoting Ms. Klein):
. . . a 12% return for UK taxpayers on their investment; he negotiated voting rights, seats on the board, and also, and this is key, he got, in writing, the fact that the banks had to use this money for what Paulson said the bailout is for, which is addressing the credit crunch. . . . Gordon Brown got that in writing and what is happening with the British banks is that they are having to begin lending again. What’s happening in the US? Let’s contrast this. 5% returns, no seats on the board, no voting rights and it turns out that they are just hoping that they spend the first phase of $125 Billion . . . .lending. But now the banks are saying what they plan to spend it on. Citi is saying they are going to spend it on merger, Morgan Stanley is spending a chunk of it on bonuses because they are paying out $10 billion on employee salaries this year, including bonuses. They only made $5 billion so that some of the money is going there. And that is another difference in Britain; Brown negotiated that they can’t be paying shareholders while they are receiving this equity. The taxpayers are the shareholders.Brian Lehrer then pointed out that Ms. Klien had been quoted in an editorial saying that the next Treasury Secretary should NOT come from Wall Street. “Crazy idea,” said Ms. Klein, “Wouldn’t it be great if the next secretary was someone who actually saw this crisis coming as opposed to contributed to its creation? Like Henry Paulson, when he was at Goldman Sachs he was known as `Mr. Risk’ because he was one of the innovators of these complex financial instruments.”
That is basically the same idea we have with respect to Mr. Bloomberg. As noted under the previous heading on the subject of urban planning concerns, Mr. Bloomberg was overly inclined to accommodate Wall Street before there was financial crisis. Dealing with a real crisis, his bias and lack of perspective is likely to be more destructive.
“Observing” an Article Suspiciously: Our Schumer Quote
We found an interesting article in the New York Observer of which we are suspicious in a number of ways. The article is Mayor Bloomberg: Suddenly Seer of Financial Crisis How Did Mike Get Cast As Mr. Market Wisdom? ‘As I Said to Obama’, by Jason Horowitz, September 23, 2008. Contrary to what might be inferred from the article’s title, the piece does not say anywhere that the Bloomberg “foresaw” anything. “Seer” apparently means that he is “financial expert” enough to understand or be “wise” about what he sees after it has already happened.
The article appeared September 23, 2008, only about a week before the Mayor disclosed his plans to attain, through billionaire exceptionalism, the special privilege of a third term. It looks like a PR “placement”piece successfully generated in anticipation of the Mayor’s plans. It is full of quotes from people saying nice things about Bloomberg’s understanding of the financial industry. The story has a few disjunctives indicating that the reporter probably didn’t know how the story was intended to be used. The story refers to the Mayor as being term-limited:
But for now, as a practical matter, it’s not really important whether expectations about Mr. Bloomberg’s ability to heal the financial world are realistic. Given the mayor’s current circumstances—term-limited mayor seeks options for prolonging time in current office or obtaining national one—it’s all upside. And the mayor, quite naturally, has taken to his role enthusiastically.Given that an assault on the City Charter to overturn the limits applicable to the Mayor did not seem to be in the offing at the time, perhaps the reporter can be forgiven for the puffy and uncritical way he refers to Bloomberg’s enthusiasm about becoming a healer of the financial world.
Another disjuncture is the article’s discussion of the possibility that Bloomberg would go to Washington D.D. to take a federal job. Wouldn’t that be something; we “temporarily” overturn term limits because fellow Billionaire Ronald Lauder wants to see Bloomberg specially privileged with a third term and then Bloomberg lights out on the city to take a job in Washington?
Mr. Bloomberg got his name in the press by calling Senator Obama and John McCain to offer financial advice.
"I said to Senator Obama last night, there are a number of different levels he has got to address, and Senator McCain the same thing,"“A number of different levels?” Great, they could have gotten the same advice from Sarah Palin.
Bloomberg went on his second-ever “Meet the Press”appearance*:
. . . .where he talked about root causes of the crisis and deflected Tom Brokaw's queries about whether he was interested in a job managing the bailout in Washington.
"I'd do anything that the country asked me to do," said Bloomberg, before asserting his intention to finish out his current term. (Although he ducked Mr. Brokaw's question about whether he intended to challenge term limits.)
* (On "Meet the Press" Bloomberg speaks more highly of "Hank" Paulson that Ms. Klein does and speaks in favor of the Wall Street bailout suggesting that there is no time for the debate Ms. Klein commented was so valuable.)
We can expect that Bloomberg, though not disclosing, probably knew exactly what he was doing in this covert campaign as he collected complimentary quotes. Here’s one in the article from Tom Friedman:
I think in his time as mayor also has an allegiance and a loyalty to the common man," said Mr. Friedman. "His loyalties aren't just with Wall Street now. He wouldn't be snookered."We don’t think that is the case. We love Friedman but Friedman, as with the Bush administration in the initial stages gearing up for the Iraq war, doesn’t always get it right. This looks like another time he got snookered. We do think Bloomberg’s loyalties are with Wall Street. The urban planning in Bloomberg’s administration has been pure urban-planning-by-investment-banker. It always makes the “deal” more important than what’s “ideal.” I am not sure we don’t have to worry that Bloomberg won’t get snookered and we probably have to worry that, as with Atlantic Yards, he will help do the snookering.
Here is where our quote from Senator Charles Schumer comes in. Apparently Senator Schumer thinks that Bloomberg is an old dog who can learn new tricks. In the beginning, the Observer article talks about a press conference where, when he was asked about whether he could oversee “a proposed $700 billion fund to buy and resell troubled mortgages,” Bloomberg said that though he could probably get the job “It’s sort of pressing it to say that I was interested in running a mortgage business, which I don’t have the expertise in, incidentally.” Later on, Schumer talks about whether “Bloomberg would be a good choice to head any emergency economic agency even if he didn’t know much about mortgages.”
“He can learn it very quickly,” said Mr. Schumer. “You don’t have to be the expert on the exact thing to understand the whole way finance works, and that he does.”Maybe that is the point here. Mr. Bloomberg himself has enough things to learn. When it comes to who should be Mayor, who is to say that there aren’t qualified individuals apart from Mr. Bloomberg who can learn what they need to so that the City of New York doesn’t need to reorganize its government to crown him with a third term.
Bloomberg had his chance to get to know Wall Street intimately and be suspicious of it. He failed to spot its problems. Why not give somebody else a chance? We should recognize Bloomberg for what the article says he is financially; he is “Mr. Bloomberg, who made his fortune by inventing and marketing the Bloomberg Terminal.” That is what he is, no matter how many Treasury Secretaries the article says he can name.
The article ends cleverly with a reference to George W. Bush whom Mr. Bloomberg, with an abominable lack of judgement, supported for a second term. The article says about Bloomberg:
He added, unprompted, that a few hours earlier he had greeted President George Bush at the airport and talked with him very briefly about the economy.Mr. Bloomberg is a politician. This Observer article that appears to have been generated with a politician’s agenda is not, when you truly consider it, about whether he has special qualifications to lead in a financial crisis.
“He just said to me, ‘Thank you so much for offering to help.’”
New York Times: Editorial Page Out on a Limb
The picture appearing at the start of this piece is from today’s front page New York Times story about today’s term limits vote. The caption of the picture “Mayor Michael R. Bloomberg argues that the financial crisis makes it important that he remain in office.” Though that is the caption, the New York Times has not yet done a new story analyzing Mr. Bloomberg’s suitability and qualifications to manage the city during these financial difficulties. This is so notwithstanding that the fact that the Times has now run two editorials urging the repeal of term limits to clear the way for a Bloomberg third term.
The first editorial (Editorial: The Limits of Term Limits, September 10, 2008), said that the Mayor needed to stay in office to lead the city “in these difficult financial times.” The second ran today in order to influence and give cover for the City Council vote (Editorial Term Limits and the Council).
Usually the editorial page of the Times runs editorials one to two days after publication of the news stories covering the subject matter, usually two. In this way the opinions offered by the editorial page can be a sober reflection on the facts. This then is an instance where the Times has gone out on a limb to reverse process by running not one, but two, editorials preceding articles with factual reportage. In fact, I am unaware of any pieces by any news organizations which like this one analyze the Mayor’s main argument to remain in office; that he has special acumen qualifying him to manage during the Wall Street financial meltdown.
Time Too Short to Reflect
In today’s Times article (Mayor’s Tactics Are Alienating Some Big Allies, by Michael Barbaro)Mr. Bloomberg dismissed people such as ourselves who testified in opposition to his move at the City Council hearing as “people who emote.” Notwithstanding Mr. Bloomberg’s dismissal, we hope that our Noticing New York reflections here contribute valuably to an appropriate consideration of the importance or probable non-importance of specially privileging Bloomberg to remain in office.
There is, indeed, a lot to think about. We have already written other pieces on the subject, but obviously this one is too late. We and others have not been given time to provide reflections, nor has the public had time to think these things through. This was by design: Bloomberg and Speaker Christine Quinn deprived all us of time for thoughtful consideration. They rushed the process, knowing well in advance what they intended to do.
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