(Picture of Kathy Wylde from Crain’s article)
Before even safely reaching the one-year anniversary of Wall Street’s biggest meltdown since the Depression, the Federal Reserve Bank of New York has appointed to its board of directors a new Director, Kathy Wylde, whose most high-profile recent actions have been to go out of her way to promote Atlantic Yards, the megadevelopment on track to be one of New York’s most conspicuous money-losing failures. (See the July 27, 2009 story in Crain’s.)
Wylde Support of Bloomberg Term Limits Overturn
Ms. Wilde has been president and chief executive of the Partnership for New York City for some time and was prominently in the news in the (pre-fiscal crisis) summer of 2008 as a supporter amongst the inner business circle strategizing for Mayor Michael Bloomberg’s overturn of term limits to get a surprise third term. Wylde effused that the business world was “primed” to help him. (See: Bigs Back Law Change to Keep Mike, By Angela Montefinise, July 27, 2008.) The Bloomberg strategy using the City Council to overturn term limits involved consciously lying in wait to rush through the override at the last minute so as to thereby ensure that a voter referendum would be side-stepped. (New York City voters had already voted in favor of term limits twice.)
Wylde Support of Economic Mega-Losses for NYC
A spectacularly flawed project in almost all respects, New York City’s Independent Budget Office has concluded that the Atlantic Yards arena, the only part of the Atlantic Yards project currently designed or for which any kind of enforceable, documented deal exists will be a net money loser for the city to the tune of $220 million($39.5 million in direct losses and $180.5 million in opportunity losses). The megadevelopment’s guaranteed inadequacies flow principally from the fact that it was set up and concocted by the developer, Forest City Ratner, as a subsidy-infusion system intended to deliver maximum benefit to the developer at the expense of the public. The IBO has conservatively calculated that on the arena alone the city will be giving the developer$726 million in no-bid giveaways.
The as yet undesigned rest of the megadevelopment has been formulated as a multi-decade no-obligation developer monopoly on a swath of valuable Brooklyn real estate that will allow the developer to blackmail the public into deeper subsidies, redoubling its net losses. In fact, just this week the developer caused New York Governor Paterson’s Empire State Development Corporation to casually shake the advance of another $25 million out of its sleeve. (See: Thursday, September 17, 2009, Noticing New York Comment on and at Today’s ESDC Board Meeting.) Since the project is unlikely ever to return the accelerated advance of that money, this extra $25 million could well bring the calculated net loss on the project up from $220 million to $245 million.
Wylde Support of Degeneration and Degradation
The mega-project, containing the seeds for its own demise from the get-go, has been foundering embarrassingly for the five years since it was proposed. The developer could quite likely go under financially. There have thus been ample and repeated opportunities for responsible organizations to call for pulling the plug on the degenerating deal. We have written before about how Ms. Wylde has, instead, errantly recommitted her support to it no matter how far it degrades. (See: Monday, July 6, 2009, Wylde Ideas, Making For a Wrong Partnership.) Most recently, despite a change in the economic environment which should have made it possible to get a much better deal for the public, Ms. Wylde endorsed a far worse one on behalf of the Partnership (see the article just linked to) where hundreds of millions of extra giveaways are being lavished on the project without quid pro quo.
Wylde Support of Uneconomic Eminent Domain Abuse
As we wrote, Ms. Wylde’s misguided support of this uneconomic megadevelopment, (and a prime reason it is uneconomic) is tied in with her misinformed support of eminent domain abuse in principle as well as specifically for Atlantic Yards. Eminent domain is used abusively to counter the natural beneficially creative forces of the economy. It, instead, favors politically connected would-be mega-developers. In New York State, eminent domain has become an industry, propelled and driven by the development entities benefiting from the abuse. (See: Columbia Pulls a Kelo, By Michael White, December 20, 2007.) It is used as a tool to create an economic shut-out of economic competitors.* The wealthy and connected are favored at the expense of the small businessman or property owner. For instance, eminent domain is used against small owners and businesses that are too economically vital to be bought out but it is never used, even when it might make sense against anyone who is in the big developers club. Many of those developers (like the failing Ratner) are purely subsidy collectors incapable of surviving in a competitive unsubsidized environment or one where they must compete for subsidy.
(* We should digress to note that there is a dangerous and escalating predilection of our national economy to engage in disingenuous practices that are unfairly shutting out the small guy in favor of big politically-manipulating corporations. That is what such authors as David Cay Johnston are writing about in books like his Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You with the Bill).)
Ms. Wylde supports the uneconomic abuse of eminent domain while denying its actual economic costs. Ironically, eminent domain proponent Wylde is taking her place on the Federal Reserve board alongside an infamous eminent domain abuser Lee C. Bollinger, President of Columbia University. One of the three highest paid presidents at a private university ($1.4 million annual compensation package), Mr. Bollinger has spearheaded Columbia’s usurpation of West Harlem using eminent domain to gain a multi-decade monopoly shut-out on the real estate there, very much like Atlantic Yards.
(Picture of Mr. Bollinger from Columbia’s website.)
Federal Reserve’s Wyldely Incompatible Role of Protecting the Soundness of the Economy and the Public as Consumer
Why is all this important to Ms. Wylde’s appointment to the Federal Reserve Board? What is the Federal Reserve supposed to do? It is supposed to “foster the safety, soundness and vitality of our economic and financial systems.” The Federal Reserve also has consumer protection responsibilities which Congress is now debating taking away. It is hardly an analogy to say that in the case of Atlantic Yards the public is the consumer and it is getting a pretty raw deal because of people like Kathy Wylde who are willing to defend the indefensible. (Pursuing of favors from political patrons like Bloomberg?) The Federal Reserve has also been the focus of attention recently as analysts ask whether its formulation and administration of the hundreds of billions in economic bailout money was overly focused on Wall Street, again shutting out the possibility of real benefit to the larger economy of smaller business on Main Street. For just one recent starter summary article on this subject, see Tenacious G, Inside Goldman Sachs, America’s most successful, cynical, envied, despised, and (in its view, anyway) misunderstood engine of capitalism. By Joe Hagan, Published Jul 26, 2009.
The New York Federal Reserve is the largest and most powerful of the 12 regional reserve banks.
So, if you are wondering about what kind of biases might govern the Federal Reserve in conducting federal policy to protect the public and ensure soundness of the economy, just remember that two of its board members who are there to set policy and direction are Atlantic Yards, Bloomberg and eminent domain supporter Kathy Wylde and eminent domain abuser Lee Bollinger from Columbia.
And there is this. According to Crain’s:
The New York Fed also has the ear of Washington, D.C.—U.S. Treasury Secretary Timothy Geithner was president of the New York Fed until his White House appointment.Worried?