Noticing New York's Testimony at Tonight's Hearing on the Draft Scope of Work for the DSEIS for Forest City Ratner Atlantic Yards Mega-monpoly

At this evening's hearing

This post may be updated with a few additional comments and certainly with a link to Atlantic Yards Report coverage of the hearing this evening (no doubt quite thorough) for the court-ordered redo of the environmental impact statement for Atlantic Yards which was necessitated because the original EIS did not take into account how much longer the meg-project would truly be likely to take.

The testimony of Noticing New York was actually delivered in two segments during the evening because of the three minute limit for oral comments.  In addition to the comments you see below, I extemporized a bit when I resumed to deliver the second half of my comments in order to refer to the comments of Deb Howard of the Pratt Area Community Council describing the kind of nearby development that has occurred in Brooklyn in a bad economy absent the kind of interference of Forest City Ratner that has more or less halted development nearer to the vicinity of Atlantic Yards.  While extemporizing, I also pointed out how many of the people testifying during the evening were there as a product of living with a Forest City Ratner together with their apparent inability to imagine alternatives to it.  That includes the few union laborers who showed up to speak on Ratner's behalf despite the his double cross (see footnote at end of testimony).

Another important note. There was some pretty devastating testimony from Michelle Del la Uz and the Fifth Avenue Committee.  It was something that had not previously occurred to me: That, because of gentrification, the delay and extended schedule Forest City Ratner has been able to command for itself (by virtue of being a monopoly) build will totally change the income levels (raise them) of those for whom apartments will be provided, disqualifying the lower income families who would have been eligible to qualify (albeit already dispiritedly small group given the tailoring of the CBA to benefit the developers courtesy of ACORN) and shutting out many black families because of the structuring of the lottery that will apply.

Coverage by Atlantic Yards Report, including a fuller description and video of the above is available here: Friday, March 01, 2013, Hearing on Atlantic Yards environmental review: critics suggest other developers be considered to achieve ten-year buildout; Forest City supporters urge removal of review roadblock (but avoid timetable).

The following is Noticing New York's testimony. 

* * * * 

February 27, 2013

Empire State Development Corporation
(Atlantic Yards)
633 Third Avenue, 37th Floor
New York, NY 10017
atlanticyards@esd.ny.gov.

Re:    Draft scope of work for the DSEIS for Forest City Ratner Atlantic Yards Mega-Monpoly

Dear ESDC:

This comment is being offered in the name of Noticing New York, dedicated to the insistence on good economic development policies in New York and the proposition that developing New York and appreciating New York must go hand in hand.  I offer this testimony as an attorney experienced in real estate, as an urban planner and as former senior government official who worked for more than a quarter of century in the areas of public finance and development for the state’s finance authorities.

    •    This hearing on the necessary dismantling of the Forest City Ratner Atlantic Yards mega-monopoly is long overdue.  As every economist knows, it is axiomatic that you can’t negotiate with and you can’t effectively regulate a monopoly.  You can’t even enforce legal documents, which explains why Empire State Development Corporation CEO Marisa Lago indicated in her public statements that she expected that Atlantic Yards will likely take on the order of four decades to complete even though the legal documents (then unreleased) call for its completion in twenty-five years or less. How much longer the community will be blighted beyond what was addressed in developer PR and in the complicity-flawed and manipulated EIS is a large part of what this hearing is about.

    •    This hearing and the revised scope of the EIS will be insufficient unless it considers the full scope of the Forest City Ratner mega-monopoly whereby governmental support and subsidy is suppressing economic activity and competition in Brooklyn.  Atlantic Yards is not truly a 22-acre project: Forest City Ratner has been governmentally assisted in acquiring more than 30 contiguous acres over which it is exercising exclusive rights, 19 towers, not 16. .  an arena plus two shopping malls.  When you also include other nearby property where  Forest City Ratner is getting government assistance to squat over the borough’s major subway lines, there are currently more than 50 acres of exclusive rights.

    •    The developer PR put out in preparation for this hearing pushes the importance of the tepidly-tempered notion that public reaction to the so-called “Barclays” arena (named after a disreputable bank) has not been quite as negative as predicted.   Gee, after inviting the world to gawk at the glitz of the Ratner/Prokhorov arena, that heaped pile of pirate plunder representing what has been stolen from the community and the deep subsidies diverting public resources from everywhere else, and the news pushed out is that the reaction to all that glittering treasure in one place hasn’t been that negative? Whoop-dee-do!  That’s damning by faint praise, not to mention that problems during construction were far worse than predicted.

    •    In fact, Atlantic Yards is a rolling disaster area.  In the mid-‘90s when I was at the New York State Housing Finance Agency, the Affordable Housing Corporation and the State of New York Mortgage Agency I worked with the New York Housing Partnership to provide subsidy to Forest City Ratner for Atlantic Commons immediately adjacent and to the north of the Atlantic Yards site.  As state agency officials we scrambled and strove to do everything we could to push the envelope, prioritize and ensure that Forest City Ratner got subsidy for that site and, at the time, it made sense to me because we were filling in a hole, blight going back to 1960 created by urban renewal clearances that, after decades, had been left gaping and unfilled.  I especially believed that we needed to do something because I had also been asked to help find solutions for the aftermath of that government bulldozing more than a decade before, in the early ‘80s when I was at the New York City Housing Development Corporation (HDC).  Little did I know that no sooner had we finally succeeded in this government effort to fill in the destruction, than Forest City Ratner would use that success we furnished as a launching pad to renew and extend the decimation of the urban renewal area, expelling competing owners and developers from the vicinity.

    •    This is a rolling disaster because, with the new decimation of the landscape, those who succeeded me at HDC faced a decision, ultimately debasing to the standards of government and ethics, about whether they would reward Forest City for such actions with additional subsidy, a decision they should not have made and which they should not have been forced to make.  Why did they have to make it?: Because the Atlantic Yards has been handed to Forest City Ratner as a presumed extension of its monopoly rather than divided up for bid amongst multiple developers like Battery Park City.  (See my HDC hearing testimony: Wednesday, July 18, 2012, Noticing New York's Hearing Testimony Re New York City Housing Development Corporation's Subsidization of Ratner's Atlantic Yards Mega-Monopoly.)         

    •    Important Footnote: When we financed Atlantic Commons we put back streets and sidewalks that urban renewal had removed, something that should now be done in dealing with the Atlantic Yards site. 

    •    This is a rolling disaster because it has created a self-feeding cycle of corruption.  Atlantic Yards Report articles have described in fastidious detail all the ways the Forest City Ratner environment harbors a “culture of cheating” besmirching the many government officials it draws in.  Worse than that, I have watched as what was once illegal has been treated as if it is now legal and acceptable, the abuse of government’s tool of eminent domain for private purposes being just one aspect of this.

    •    This is a rolling disaster because the unfair power advantage enjoyed by Forest City Ratner has been extended, the cocked playing field tilted even further, including through influence over BIDs, by having other neighboring landowners shoulder the taxes, special assessments and BID contributions from which Forest City Ratner gets exempted.

    •    It is a rolling disaster because the continued deep, exclusive and self-perpetuating cycle of subsidization of the Ratner mega-monopoly turns city, state and federal money* into a launching pad for, and lure to, other nefarious developers for similar land grabs and abuses of the public trust.  Would we have asset-stripping at Long Island College Hospital (LICH) or the underfunding and selling off of our libraries were it not for the way that the Atlantic Yards abuses have been tolerated?  Some are even glorifying the impunity of it all.  The impact of continuing to assist such social disequilibriums must be addressed in the environmental impact statement.

(*  The diversion of subsides and resources for Ratner’s benefit are everywhere.  The Brooklyn Navy Yards, intended to incubate new businesses to provide jobs, has turned space over to Ratner for modular operations allowing it to avoid paying construction workers on site.  Rather than use an empty, subsidized parking lot for black cars clogging streets around the arena, public street space is turned over to arena use.  This list goes on.)   

                                Sincerely,

                                Michael D. D. White

One of the most disconcerting aspects of the evening was that BAM, the Brooklyn Academy of Music sent a representative to support the Ratner monopoly.  BAM refuses to provide a forum for any films that are critical of development practices in Brooklyn

(Updated 02/28/2013 to refer to the testimony by the Fifth Avenue Committee.  Updated 03/032013 to include link to Atlantic Yards Report  coverage.)

“Barclays” Center Opening Pending; Fellow Government Officials Don’t Back Bloomberg Re Minimizing NY Lawsuits Against Barclays Bank

Noticing New York earlier covered the fact that Mayor Michael Bloomberg has acknowledged that New York City may be suing Barclays Bank over its rate manipulation in the LIBOR scandal but minimized any possibility that the losses would be significant. Such lawsuits could be relatively contemporaneous with the grand opening of Bloomberg-supported, city-subsidized Ratner/Prokhorov basketball arena that will promote the “Barclays” name. (See: Friday, July, 20, 2012, “Barclays” Center Opening Pending, Bloomberg De-Minimizes Envisioned New York City Lawsuit Against Barclays Bank. Is He Out On A Limb?)

The Noticing New York coverage suggested that Bloomberg might be going out on a limb when he stated, after being briefed on the subject by Mark Page, his budget director, that any losses for which the city might sue would be a “de minimis amount of money.”

At the moment that’s what the mayor has said but other government officials, including the office of John Liu, the city comptroller, aren’t backing Bloomberg up with any similar assessment that city losses will be “de minimis.”

The NYC Comptroller’s Office

A spokesman for Comptroller Liu informed Noticing New York that Liu’s office is “closely monitoring developments and are keeping all our options on the table as the financial scope of the suspected manipulations is determined.” That seems reasonable as the New York State Attorney General is conducting a joint investigation with the Connecticut Attorney General that could soon be joined in by other states’ attorneys general and has vowed to “follow the facts wherever they may lead.”

Following up on the mayor’s remarks I asked Liu’s office whether his office could confirm the mayor’s statement that any losses the city may suffer from the LIBOR manipulation will be “de minimis.” Asking Liu’s office for such a confirming assessment makes sense since Liu’s office monitors the city’s finances and is supposed to be looking over the mayor’s shoulder to ensure the mayor’s proper management of the same. In addition, given that pension funds are usually among the funds most quickly cited as likely to have sustained appreciable losses as a consequence of the rate manipulation and the Comptroller’s office has responsibilities for the city pension fund I asked whether Liu’s office could confirm that any losses for any of the other funds for which the Comptroller has responsibilities, including the city pension fund, will be “de minimis”?

A spokesman for Liu, characterizing the situation as “fluid,” stated that the office was unable to provide confirmation on either of these questions. When Bloomberg said that the city would only have “de minimis” losses did he mean just the city standing alone in the most technical sense or did he also mean the city pension fund and other technically separate city agencies that are nonetheless tied in with the city’s financial health? One can only guess. To be fair, the Comptroller’s office was altogether more cautiously timid than Bloomberg, not even willing to confirm that it has lawyers looking at the lawsuits that Bloomberg has already publicly proclaimed are possible.

The New York City Housing Development Corporation

The New York City Housing Development Corporation (“HDC”) is one city agency that could suffer losses due to the LIBOR scandal without those losses being technically considered losses suffered by the city itself. HDC is looking at issuing more bonds for a new residential building furthering Forest City Ratner’s envisioned Atlantic Yards mega-monopoly. Noticing New York gave recent testimony on the proposed bond issuance that, among other things, went into the connection of the proposed bond issuance to the LIBOR scandal issue. The new building would be on the same block as the “Barclays” Center and would be structurally and reputationally integrated with it.

Noticing New York contacted HDC and, like the Comptroller’s Office, HDC would not confirm that any losses suffered by HDC or its bondholders from the LIBOR manipulation will be “de minimis.” Mark Page, the city’s budget director with whom mayor Bloomberg conferred before characterizing any possible city losses as “de minimis” is on HDC’s board. If after talking with Budget Director Page Bloomberg meant to say that the city would not incur any significant losses in big picture terms he would presumably have been representing that HDC as part of that big picture was not expected to incur any losses. That would seemingly make it a no-brainer for HDC (which HDC board member Mark Page should have checked in with to make such an assessment) to confirm that all its possible losses will be “de minimis.” But it didn’t.*

(* Here is one semi-absurd possible background explanation to contemplate: HDC foresees possibly significant losses which the city budget director believes will be cancelled out for the city in big picture terms by ways LIBOR rate manipulation may have benefitted other city financial activities. There will be more on the complexity of calculating net losses later in this article.)

When HDC would not confirm that any losses suffered by HDC or its bondholders from the LIBOR manipulation will be “de minimis” I had a follow-up question to put to the agency the next day:

Can HDC confirm that if any losses suffered by HDC or its bondholders are substantial there will be no effect or reduction in subsidies available for HDC projects, including perhaps, but not limited to, subsidy for projects like the Forest City Ratner Building ("Building 2") that HDC held a hearing about last Wednesday?

HDC declined to provide me with a confirmation that any substantial losses suffered by HDC or its bondholders would not reduce available housing subsidies.

The Metropolitan Transportation Authority

The Metropolitan Transportation Authority (MTA) is another agency that, as a public authority, is technically distinct from the city itself. Nevertheless, its financial health and finances do interrelate with the city’s and, once again, NYC Budget Director Mark Page is on the MTA’s board to represent the mayor.

The MTA’s spokesperson previously confirmed to Noticing New York that the MTA’s legal counsel was reviewing options in relation to the LIBOR scandal, and would “vigorously pursue all available legal actions” and “do everything possible to protect the MTA.” Following up on the mayor’s assurance of “de minimis” NYC losses I asked whether the MTA could confirm tha any losses that the MTA or its bondholders may suffer as a result of the Barclays Bank LIBOR scandal will be “de minimis”. The MTA’s spokesman responded by saying, “the Mayor speaks for the City of New York” and then, observing the above noted distinction that the MTA’s public authority status makes it a technically separate financial entity, stated, “The MTA is a separate entity under the State of New York, and our debt is not a part of the City government’s debt. The City’s debt portfolio and the MTA’s debt portfolio have different characteristics.” Rather than confirm that losses will be minimal the statement provided by the spokesman is that, “The MTA is continuing to analyze the matter and is not yet ready to make a pronouncement about the extent of any potential loses.”

Bloomberg possibly did not mean to include the MTA in the big picture of whether New York City’s LIBOR losses will be “de minimis” but if he did, the absence of substantial possible losses in this bigger picture is not something the MTA is willing to confirm.

Agencies Providing Substantial Subsidized Financing to Atlantic Yards and “Barclays” Center

New York City, HDC and the MTA constitute three out of four of the local government entities providing substantial subsidized financing to the “Barclays” Center and the Atlantic Yards mega-monopoly in a variety of ways: tax-empt bonds, land value write-downs, deferred collection for purchase prices, direct cash, exemption from paying real estate taxes, etc. The forth such agency financing the “Barclays” Center and the Atlantic Yards mega-monopoly is Empire State Development the state agency (and public authority) that is the eminent domain-abusing mega-project’s lead sponsor.

Empire State Development

Following up on the mayor’s minimizing characterization I asked ESD whether it was willing to confirm that any losses that it (or other agencies for which it serves as umbrella) may suffer as a result of the Barclays Bank LIBOR scandal will be “de minimis”? I couldn’t get such a confirmation from ESD either. ESD’s spokesman responded that ESD stood by its previous response that “The matter is being reviewed by our counsel’s office and we cannot comment further at this time.”

I did not ask either the MTA or ESD whether substantial losses, if they occur, would affect the level of funds at their disposal to subsidize and finance New York City projects but it is a pretty safe bet that the MTA, ESD and HDC would all be affected in this regard if they incur substantial losses.

New York State Comptroller

The New York State Comptroller is similarly situate to the New York City Comptroller, given that the New York Sate Comptroller has responsibilities with respect to investment and management of the state pension fund. As I noted above, pension funds are usually among funds most quickly cited as likely to have sustained appreciable losses as a consequence of the rate manipulation.

When I first inquired about whether the State Comptroller was looking at suing Barclays over LIBOR manipulation the spokesperson for the State Comptroller provided a statement that The Comptroller's Office “is monitoring the situation as it unfolds. Until there is a determination as to the extent of the effect that any manipulation actually had on rates and the time period it occurred it is premature to make an assessment regarding the direct or indirect impact on the state.” When I asked for confirmation that the office was in touch with or reaching out to communicate with other state agencies (including any of those it supervises and regulates) about this subject I was told only that, “We will disclose information relating to LIBOR at the appropriate time.” One of the agencies over which the State Comptroller exercises oversight is ESD, mentioned above.

When Bloomberg went public with the fact that he envisioned the city would sue about LIBOR I asked whether the Comptroller would, given that fact, confirm like the MTA and ESD that it had counsel looking at the possibility of suing Barclays Banks in connection with the LIBOR rate manipulation scandal. They weren’t willing to do so.

And I asked whether the Comptroller could confirm that any losses for any of the other funds for which the Comptroller has responsibilities (including the state pension fund) will be de minimis. The office was not willing to do so.

Has the State Comptroller’s Office been contacted by legislators wanting assurance that that office is monitoring possible state losses and ready to sue as appropriate to protect state interests? I don’t know; they wouldn’t tell me that either.

State Attorney General’s Office and State Comptroller

In actuality, maybe I didn’t need to go to the State Comptrollers office to get these confirmations that they weren’t giving me. I haven’t yet been able to get the New York State Attorney General’s Office to exchange communications with Noticing New York about the LIBOR scandal, but Attorney General Eric Schneiderman was on the Brian Lehrer show yesterday talking about exactly this. Brian Lehrer asked Schneiderman about the Wall Street Journal’s report that Schneiderman was investigating whether New Yorkers have incurred losses as a result of the LIBOR rate manipulations (at about 12:20 in segment). Lehrer asked Schneiderman whether the state pension fund was a possible victim or what else might have lost money due to the fraud. Schneiderman said, “Anyone could have lost money” due to the artificiality of the rates (at different times rates were manipulated both up and down for the benefit of the bank) and said that it was a “broad investigation” and that “there are a lot of agencies that are involved” and said that it was a global issue with investigations all over the world. Prompted by Lehrer he said that figuring out who to sue was one of his challenges (there are fourteen banks involved.)



Schneiderman did make the point (as we will get to in a moment) that “the damages on this are tricky to assess.” Schneiderman didn’t specifically say he was in touch with the State Comptroller’s Office. Has Schneiderman been in communication with the Sate Comptrollers’s office about the pension fund while putting together his assessments? It is probably a sound instinct to think that he was.

What is true vis-à-vis the State Comptroller, the state pension fund and losses is likely also to be true vis-à-vis losses and the City Comptroller and the city pension fund.

New York City Economic Development Corporation, New York City Industrial Development Agency, New York City Capital Resource Corporation and Build New York City Resource Corporation

I asked the city development agencies functioning in consolidation with the New York City Economic Development Corporation (also the New York City Industrial Development Agency, New York City Capital Resource Corporation and Build New York City Resource Corporation) whether they had legal counsel looking at the question of suing Barclays Bank in connection with the LIBOR rate manipulation scandal, given that the MTA and the Empire State Development agency have now confirmed that they have legal counsel looking at the possibility of suing Barclays Bank in connection with the LIBOR rate manipulation scandal and given that Mayor Bloomberg said he considers it is possible the city will be suing.

I also asked whether EDC (and NYCEDC, NYCIDA, NYCCRC) could confirm that any losses suffered by EDC (and NYCEDC, NYCIDA, NYCCRC) or bondholders of the agencies due to LIBOR manipulations would be de minimis?

I received an interestingly qualified and technical response from their spokesperson about how and why the agencies would not be “directly” impacted:

“New York City Economic Development Corporation does not borrow and it has very few loans outstanding, all of which are at fixed rates of interest. New York City Industrial Development Agency, New York City Capital Resource Corporation and Build New York City Resource Corporation are conduit issuers. As conduit issuers they are not directly impacted by the questions relating to LIBOR quotations.”

It takes some financial bond structuring knowledge to understand the technical concept of “conduit issuer” being invoked here. What it means is that even though a government agency is the issuer of bonds for purposes of gaining the privilege of issuing bonds that are triple tax-empt (from federal state and city income taxes) the issuer structures that bond issuance as a non-recourse transaction pledging no more than the asset being financed (and its revenue) and allowing the agency that is technically the issuer to stand at a remove from the transaction, intending that it not itself be liable for payment on the bonds and theoretically insulated from any possible losses that may be incurred in connection with the transaction. In other words bond proceeds go to a developer and the developer agrees to pay back the bond holders and the “issuing” agency stands conceptually on the sidelines as a somewhat passive witness to that money going back and forth. Ergo, there is the idea that the “conduit issuer” is incapable of having “direct” losses. (Even though it stands conceptually on the sidelines the “conduit issuer” usually receives fees for lending its tax-empt status.)

Here is a legal nicety, a distinction with no practical difference: You can have two “conduit issuer” structures that are for all intents and purposes identical but in one case title to all of the financed assets and revenues would be held by a bond trustee, but in another title would be held by issuing agency but pledged to a trustee. In the first situation it would be easier to make a technical assertion that the “conduit issuer” was incapable of sustaining a direct a loss.

None of this is to say that a “conduit issuer’s” bondholders would not be sustaining losses if LIBOR was manipulated, nor that the developer wouldn’t sustain losses which might result from losses on invested bond funds, losses in connection with the project loan rate, or losses from a swap derivative intended to lay off risk. And this is not meant to say that even a “conduit issuer” would be immune from resulting lawsuits or absolutely free to ignore obligations to sue to make sure that the its bond resolutions and indentures were contractually honored. Indirect losses could involve incurring legal fees to protect bondholders. In a collapsing transaction the issuer might also find its fees don’t get paid. Some “conduit issuers” might hope that all losses associated with protection of its bondholders would be shouldered by the bond trustee and/or the outside professional who structured the transactions: But would that be the case?

One last thing: The implication that LIBOR has no possible influence on the determination of a fixed rate of interest might not be entirely correct.

Difficulty of Making a Quick Assessment (Like Bloomberg’s) of the Level of Damages

One of the reasons no one (other than Mayor Bloomberg) is jumping up to furnish assurance that LIBOR losses will be minimal is because it is so complicated to sort out where LIBOR losses will fall and how to calculate them. One thing that’s true is that any one entity may at the same or different times have experienced both benefit and losses in connection with LIBOR manipulations (and remember again that rates were also manipulated both up an down). Where there is both benefit and loss it can be argued (along the lines of Bloomberg’s own argument in this respect) that things should be considered a wash or at least netted out. Alternatively, a party might find that it is incumbent for it to be both a defendant party in one or more lawsuits where it incurred benefit and a plaintiff party in lawsuits where it incurred losses. (Conduit transactions might actually complicate and preclude treating as a wash or netting out benefits and losses that have thus been legally compartmentalized.) In other words, it’s potentially very messy and difficult to sort out, but recognize at least that whether one is a plaintiff or defendant lawsuits just aren't fun.

Yesterday, some of the difficulty in assessing where the losses were was discussed on a Brian Lehrer show segment in which Matthew Goldstein, the editor in charge of Wall Street Investigations for Reuters, was being interviewed about pending arrests in the rate-fixing scandal (including NYC Barclays traders). (See: The Brian Lehrer Show:Will the LIBOR Scandal Lead to Arrests? Wednesday, July 25, 2012.)



At one point in this discussion (10:15 in the recording) Brian Lehrer somewhat paraphrased Bloomberg’s expression* of his minimizing “wash” theory:

I think Mayor Bloomberg has said that with the different kinds of banks and investors here it may be a net wash for New York with those who gained and those who lost from the manipulation. On the other hand, we have Attorney General for new York State Eric Schneiderman coming on later in the program and reportedly he’s investigating at least the possibility of filing civil suits against some banks because I guess the New York State pension fund would have lost money if these interest rate rates were, you know, manipulated below the market.

(* It could be that Brian Lehrer was listening to his home WYNC when the station broadcast the story quoting Bloomberg, but if he wasn’t I’d like to think Lehrer was reading Noticing New York: As WNYC didn’t post the Bloomberg story on the web the only place it is available on the web is in Noticing New York’s republication of what I consider an important story.)

Around Lehrer's paraphrasing, Goldstein had some assessments of the “wash” concept and its complexity, when asked by Lehrer who the victims were (at about 8:50 in the recording):

I may be somewhat different from some of my other journalistic colleagues. I’m not convinced that there were a lot of victims.- Or, it’s difficult to identify the victims because obviously there were pension funds that invested in some of these sorts of interest rate sensitive securities that were tied to LIBOR but if LIBOR is being manipulated on one level you may have benefitted on another level. I mean keeping LIBOR low can actually help someone getting a loan, you know a lot of loans are tied as a benchmark. So I think that in terms of the dollars and cents of who got hurt we will definitely see litigation but there will be a deeper analysis: OK maybe you got hurt on this transaction but did you get helped on another? . . .

. . . You don’t want to have a system where people can game the system even if the actual harm to investors may not be in, individual things, large; it’s the idea that there is a select class that can sort of change the rules as they want. . .

. . . people have been arguing this and those cases are working though. I just think at the end of the day it will be difficult to identify - - And I’ve talked to other lawyers on this and they can argue it on both sides- - and I would expect an attorney general to be aggressive in pushing it – but, you know if a pension fund were also involved in doing some sort of borrowing that it needed or some sort of leveraged loans that it invested in it could have benefitted. I think the litigation is going to be an interesting analysis behind how it actually all plays out.

Hot topic that the LIBOR fraud is, on today’s Brian Lehrer show the benefit vs. harm possible wash came up again in another segment (See: July 26, 2012, The Brian Lehrer Show: Washington Grills the Banks, Thursday, July 26, 2012.) where it got a less endorsing assessment from Wall Street Journal economic policy reporter Damian Paletta (at about 14:00 in the recording):

Paletta: There are a lot of cities who have filed lawsuits because they feel like they have really gotten screwed and quite frankly a lot of these cities are in really tough financial shape right now so the impact on them might be pretty severe. So I think it’s going to take time for us to kind of find out who the victims are here, because this is a little bit strange how the LIBOR impacts everyone’s life, but there’s definitely folks on either side of this and I think it’s going to take some time for it all to sort of shake out.

Lehrer responded: No matter who the victims turn out to be it was still people at the top of the biggest banks deciding that for their own purposes they were going to manipulate interest rates, and lie about interest rates and cover up what the true interest rates should have been. .not thinking about the 99% or even their other competitors; in the 1%.

Given what a mess this is you can see why government officials are not providing assurance that manipulation losses will be minimal. While the losses will, in the end, need to be calculated, Attorney General Schneiderman also made clear in his interview yesterday that there will be crimes he can criminally prosecute whether or not substantial losses get identified.

Still, the question raised here is whether Mayor Bloomberg went out on a limb to trivialize the possibility of New York City losses as a result of the rate manipulation. Bottom line, I think it’s clear that he did. Quite rightfully, other government officials are not backing him up (even though there is plenty of reason for them to want to if they could).

Maybe when the “Barclays” Center arena opens in the fall and Bloomberg has the urge to attend it we will have the spectacle of a number of government agencies simultaneously suing Barclays Bank for substantial losses. Maybe we won't yet have gotten to that stage and there won’t yet be many New York government agencies suing Barclays. Maybe the defining clarity of that moment will only come from Barclays traders being criminally prosecuted for self-interested rate manipulation. Rather than make a rushed assessment, let's just wait and see.

Below, in reverse chronological order is all of Noticing New York's prior coverage on this topic:

• FRIDAY, JULY 20, 2012, “Barclays” Center Opening Pending, Bloomberg De-Minimizes Envisioned New York City Lawsuit Against Barclays Bank. Is He Out On A Limb?

• THURSDAY, JULY 19, 2012, “Barclays” Center Opening Pending, Will Empire State Development Sue Barclays Bank?: ESD Says The Question Is Being Reviewed By ESD Counsel’s Office

• TUESDAY, JULY 17, 2012, Will The MTA Sue Barclays Bank Over LIBOR Rate Manipulation Scandal? MTA Says It Will “Vigorously Pursue All Available Legal Actions”

• SATURDAY, JULY 14, 2012, Will The Empire State Development Corporation (ESD), The MTA, NYC And New York State Sue Barclays Bank?

“Barclays” Center Opening Pending, Bloomberg De-Minimizes Envisioned New York City Lawsuit Against Barclays Bank. Is He Out On A Limb?

With a significant amount of New York City government hoopla about to be unleashed with respect to the opening of the “Barclays” Center (i.e. the Ratner/Prokhorov basketball arena for the Nets) Mayor Bloomberg may be going out on a limb to minimize the story about how NYC could be suing Barclays Bank at pretty much the same time. Baltimore and other municipalities are suing Barclays Bank for its rate manipulation in the LIBOR scandal, but Bloomberg is taking the position that New York, a much bigger city than Baltimore, the financial capital of country and a leader in doing government financing in terms of both scale and complexity is only likely to have “de minimis” losses because of Barclays . . . but Bloomberg is nevertheless envisioning that NYC may very well be participating in lawsuits against Barclays.

The story about the Mayor’s consultation with his budget director Mark Page was on WNYC yesterday evening. Noticing New York is providing WNYC's entire story below since it is not otherwise available on the internet:

Mayor Bloomberg says the city may have lost money due to rate tampering by large banks. But he doesn't believe the losses were large. Mark Page, Director of the Office of Management and Budget, briefed the Mayor this morning on the city's potential exposure. The city has swaps agreements on construction bonds, linked to a key interest rate that may have been manipulated.

Cut to clip of Mayor Bloomberg himself:

“If the rate went down some city debt would be adversely impacted, and some city debt would be favorably impacted. If there are class action suits, we'll join em, but it would be a de minimis amount of money.”

It's the first time the Mayor has spoken on the subject since Barclays Bank admitted it tampered with the benchmark London Interbank Offered Rate, or LIBOR.

Is Bloomberg paying attention to Noticing New York’s inquiries about what government agencies will be suing Barclays? Bloomberg’s quick and dismissive assessment of the lawsuit situation comes just two days after the New York City Housing Development Corporation (“HDC”), a Bloomberg-controlled financing agency and one of the biggest municipal bond-issuing agencies in the country, declined to comment when Noticing New York inquired if that agency would be suing Barclays (quote: “HDC declines to comment on these issues at this time.”)

On Wednesday HDC held a hearing respecting its proposal to issue bonds for a building that will be structurally and reputationally a part of the “Barclays” arena. HDC is proposing to issue approximately $92 million in additional bonds, secured by the new building, to finance Forest City Ratner’s proposed Atlantic Yards mega-monopoly. It also plans to provide the Forest City Ratner building with a significant amount of subsidy in addition to those bonds but did not publicly disclose what the amount of that subsidy (or even a ballpark figure) would be before the hearing being held to take comment on the financing (and the amount is still unknown). Noticing New York provided testimony at the hearing opposing the issuance of those bonds.

The mayor says the city may be suing Barclays. At the same time HDC, a city agency accountable to Bloomberg through his appointees, is mum about whether it will be suing Barclays but earlier Noticing New York stories covered the fact that the counsel for two of the other agencies financing Atlantic Yards and the “Barclays” arena, the MTA and Empire State Development, are considering the possibility of suing Barclays. That means that at least three out of four of the principal financing agencies for “Barclays” arena block are looking at suing Barclays Bank. Despite HDC’s being mum on the subject it is probably four out of four. And the New York State Attorney General is investigating Barclays together with the Connecticut Attorney General, perhaps soon to be joining with other states’ attorneys general as well.

Here is Noticing New York’s prior coverage to date on the above (in reverse chronological order):

• THURSDAY, JULY 19, 2012, “Barclays” Center Opening Pending, Will Empire State Development Sue Barclays Bank?: ESD Says The Question Is Being Reviewed By ESD Counsel’s Office

• TUESDAY, JULY 17, 2012, Will The MTA Sue Barclays Bank Over LIBOR Rate Manipulation Scandal? MTA Says It Will “Vigorously Pursue All Available Legal Actions”

• SATURDAY, JULY 14, 2012, Will The Empire State Development Corporation (ESD), The MTA, NYC And New York State Sue Barclays Bank?

It’s clear why Mayor Michael Bloomberg wouldn’t want to play up a possible city lawsuit against Barclays. Whatever the losses to the city occasioned by Barclays Bank's misconduct, the city has invested a flabbergasting sum in the “Barclays” arena itself. Hundreds of millions of direct New York City cash subsidy has so far been given to the Atlantic Yards mega-monopoly and the Barclays arena (replacing properties that were actually taxpaying and plans for more) will also be off the city tax rolls so the cost to the city of just the arena is up close to around one billion dollars. No matter how conservatively you calculate the net loss it is in the hundreds of millions of dollars.

Further, in writing about this before I raised the question about whether city assessment of the situation might be affected by how much Mayor Bloomberg is “a friend of the banking community.” In connection with previous “Barclays” arena promotion hoopla Bloomberg saluted Bob Diamond, the Barclays president who recently resigned because of the LIBOR scandal as his “friend.” (See: Tuesday, July 03, 2012, Flashback to March 2010: Mike Bloomberg calls Barclays' Bob Diamond "my friend"- which includes a video of Bloomberg’s statement of affinity.)

Is Bloomberg going out on a limb with his `de-minimizing’? Was the city Budget Director Mark Page able to make this assessment so quickly? Did Bloomberg mean that it was just specifically the city’s loss he could consider minimal or did he mean the city and all of its bond financing agencies such as HDC (Mr. Page is on HDC’s board as one of Mr. Bloomberg’s representatives) and the New York City Economic Development Corporation? Remember the 2008 financial crisis when no one could figure out or know for certain where all the losses would be and what their amount would be because the interrelationships were so complicated? There are similarly complex and tangled interrelationships to be assessed here.

If you begin to search the internet you will see what starts to pop up and how frequently:

• The New York City Executive Report on the City’s 2011 Budget, Message from the Mayor with Mark Page’s name on it

• Look at the same Executive Report for the city’s 2010 Budget.

• The City Comptroller's Comprehensive Financial Report for the fiscal year ending June 30th 2008 has this kind of language in it about NYC financial risk mitigation:

“In its August, 2004 basis swap, the City’s variable payer rate is based on SIFMA and its variable receiver rate on a percentage of LIBOR. However, the stepped percentages of LIBOR received by the City mitigate the risk that the City will be harmed in low interest rate environments by the compression of the SIFMA and LIBOR indices.”

• HDC has bonds where LIBOR comes into play. It could very likely be the majority of HDC's bonds that do.

• Here from April 2010, generated by Barclays Bank itself, is a “Barclays Capital Trading and Distribution Commentary” about the municipal market. It warns “The views and recommendations in this commentary are the short-term views of the Barclays Capital Municipal Trading Desk.” It notes that Barclays “will price a New York City Housing Development Corporation weekly VRDN next Friday.” The price for these “Variable Rate Demand Notes” was probably keyed off Libor. Elsewhere in this document it evaluates market interest rates this way: “The stronger economic picture and expected govt debt supply next week weighed on treasury yields. Libor swap yields rose over 5bp in the 3y-7y sector for a second consecutive day. SMA Ratios dropped in response, however, activity was much lighter than yesterday.”

• State agencies which issue bonds to finance projects in the city also keyed such bonds off LIBOR as a benchmark for all sorts of things. Here is just one $131,105,000 Dormitory Authority of the State of New York financing. DASNY is a big issuer of bonds so there are more. . . many, many more.

Despite Bloomberg’s `de-minimizing’ this doesn’t look like the story is going to end here. Noticing New York will also be doing some follow-up on where the New York State and City Comptrollers are in overseeing these matters and possibly bringing their own lawsuits, particularly with respect to the city and state pension funds.

“Barclays” Center Opening Pending, Will Empire State Development Sue Barclays Bank?: ESD Says The Question Is Being Reviewed By ESD Counsel’s Office

As previously covered here, Baltimore and a number of other municipal governments are suing Barclays Bank in connection with its LIBOR benchmark interest manipulations. (See: Saturday, July 14, 2012, Will The Empire State Development Corporation (ESD), The MTA, NYC And New York State Sue Barclays Bank?) It therefore seemed logical for me to wonder whether the state’s Empire State Development agency and other state and local governments in New York would also similarly be suing Barclays. Contacting the MTA I found the agency already had on hand a prepared statement to the effect that its legal counsel was reviewing and would vigorously pursue its legal options in this regard:

“The MTA has asked its legal counsel to review its options in relation to the LIBOR scandal, and will vigorously pursue all available legal actions. We are outraged about the apparent market manipulation, and will always do everything possible to protect the MTA.”

(See: Tuesday, July 17, 2012, Will The MTA Sue Barclays Bank Over LIBOR Rate Manipulation Scandal? MTA Says It Will “Vigorously Pursue All Available Legal Actions”.)

In addition, the New York State Attorney General's office is conducting an investigation into the manipulations’ financial harm to New York. That investigation is currently being conducted jointly with Connecticut’s attorney general with the AG’s office confirming that the “joint investigation could soon spread to other states.” (See: New York AG probing LIBOR scandal: Eric Schneiderman's investigation could reveal whether banks violated state anti-trust and fraud laws by manipulating the London Interbank Offered Rate, by Shane Dixon Kavanaugh, July 16, 2012.)

New York Attorney General Schneiderman’s office has released a statement that says:

“Working together, the New York and Connecticut attorneys general have been looking into these issues for over six months and will continue to follow the facts wherever they may lead.”

The above quoted Crain’s article echos my previous columns about Barclays' potential liability, saying the implicated financial institutions could be “on the hook for hundreds of billions of dollars.”

(* Matt Taibbi says that the “scale is just mind-boggling. Every town and municipality in America probably has investment holdings that are pegged to LIBOR. I think The Wall Street Journal calculated $800 trillion of financial products.” $800 trillion of loans and derivatives worldwide was the figure being used in NPR coverage yesterday.)

The Attorney General’s investigation and assessment of “whether New York suffered losses from the alleged rate-rigging scheme by banks” must mean that it is talking with all affected city and state financial agencies. They would have to be in such communication in order to be effective in answering the questions that need to be asked. I’ve contacted the Attorney General’s office with a media inquiry to confirm this but they have so far avoided getting back to me. I won’t take it personally as the Crains’ article indicates that the office also avoided getting back to Crains.

This gets me back to the original question: Is ESD, the state agency that financed the “Barclays” Center (the Ratner/Prokhorov basketball arena), going to be among the growing list of government entities that sue Barclays?

ESD’s press office confirmed to me that the question is in fact “being reviewed by our counsel’s office.” In other words, in that respect they are like the MTA.

I also asked whether ESD would, alongside the MTA, confirm:

• That ESD is similarly outraged about the apparent market manipulation.

and

• That ESD is similarly committed to do everything possible to protect ESD.

The press office’s response was that ESD “cannot comment further at this time.”

Given the pending opening of the Ratner/Prokhorov “Barclays Center” which will involve a lot of hoopla and PR playing up the Barclays name it is clear why ESD is naturally loath to excoriate the Barclay Bank at this time. ESD probably also has plenty of reason to hope that the “Barclays” is somehow is exonerated or that the bank gets off lightly in terms of the PR price it pays. Is it unfair to think that such hopes would have any possible effect on the vigor with which ESD might pursue this matter or affect the timing of its actions so that any actions ESD takes against Barclays does not coincide with the grand opening of the arena with that name that ESD itself financed?

It must certainly come up in the conversations about the implications of ESD’s actions, as I pointed out in a fly-on-the-wall (wouldn’t you love to be?) comment in my first post on this subject, speculating about the meetings that senior management and counsel at the affected government agencies must be having as they consider their obligations to recover losses for New York taxpayers.

A reader suggested to me that for clarity’s sake I reiterate from my first column the many ways that Barclays may be legally liable to the government financing agencies for the bank's rate manipulations. I am repeating from that column the bullets below. As you review them you see the importance of affirmative good faith assistance from an agency like ESD in order for investigations like the Attorney General’s to be fully effective. (This list is only a starter list):

• The financing agencies may have invested in bank instruments that paid them a lower rate of interest.

• The rate that the agencies received from developers paying loans may have been dragged artificially low.

• The agencies themselves may have paid lower interest rates on their own municipal bond obligations, but even if this was superficially to their benefit it may now make them liable to their bondholders and when sued by those bondholders they may have to legally implead (i.e. sue, or cross sue) Barclays as a result.

• Financial transactions are sufficiently complex these days so that it takes a fair amount of unraveling before all the implications of a manipulation like this can be fully assessed in terms of Barclays likely liability to the government agencies. For instance, even if the rate an agency itself was obligated to pay on its own bonds might have been lowered by Barclays shenanigans the agency (or maybe developers the agencies were assisting) might have ventured into the questionable risk of rate-swapping agreements whereby the net result was a more significant injury.

I have been in touch with other New York government agencies about whether they will be suing Barclays. I will report on my communications with the State Comptrollers Office and the City Comptrollers Office in a follow-up article: I still have some outstanding questions for which I am seeking answers.

One other agency from which I did receive a response of sorts is the New York City Housing Development Corporation. HDC is planning to issue more bonds to finance Forest City Ratner’s proposed Atlantic Yards mega-monopoly (approximately $92 million additional bonds plus providing significant additional subsidy in an unspecified amount) for a building that will structurally and reputationally be a part of the “Barclays” arena. Yesterday, at HDC’s hearing about whether to issue those bonds I testified that before making its decision about issuing such bonds the HDC board should be thoroughly informed about “all the possible lawsuits against Barclays that may or will be brought by HDC and other agencies.” The HDC board includes* the city’s Director of the Budget and Commissioner of Finance. These city officials, though appointed by Mayor Bloomberg, a friend of the banking community, should care about these things.

(* The City Comptroller, John C. Liu, is not on the board but should have jurisdictional review powers he may want to exercise in this regard.)

Will HDC's legal counsel review and vigorously pursue its legal options in relation to the LIBOR scandal like the MTA ‘s? Will it be reviewing the question like ESD’s counsel? The response from HDC Press Secretary Eric Bederman when I made inquiry specifically in reference to the hearing, prior thereto:

“HDC declines to comment on these issues at this time.”

One would certainly hope that HDC would not shirk its responsibilities to protect the taxpayers merely because it would generate bad PR in connection with a Bloomberg-supported building it is financing.

This next building for which tax-empt bonds are proposed to be issued together with the adjoining “Barclays” arena itself and all of the proposed Atlantic Yards are being financed by the coordinated efforts of the ESD, the MTA, and HDC (plus a lot of money from the city itself). I suppose that to be assured that two out of three of these financing agencies are looking at the question of suing Barclays Bank to recover losses from the LIBOR rate manipulation is pretty good. Let’s see how things stand the day of opening ceremonies for the Ratner/Prokhorov “Barclays” arena.

Noticing New York's Hearing Testimony Re New York City Housing Development Corporation's Subsidization of Ratner's Atlantic Yards Mega-Monopoly

(Above, a collection of government officials, present to listen to testimony, just before the HDC hearing.)

The New York City Housing Development Corporation held an important hearing today on its proposed very substantial subsidization of Forest City Ratner's Atlantic Yards mega-monopoly. Here is Noticing New York's testimony.

* * * *

July 18, 2012

New York City Housing Development Corporation
110 William Street
New York, NY 10038

Re: HDC’s proposed issuance of up to $91.96 Million in tax-exempt bonds to (plus award of accompanying additional subsidy) to fund Building 2 (461 Dean Street in Brooklyn) of Forest City Ratner’s proposed no-bid, eminent domain-abusing Atlantic Yards mega-monopoly


Dear New York City Housing Development Corporation,

The following is Noticing New York’s testimony respecting the proposed issuance of tax-exempt bonds for the above mega-monopoly.

Here are changes that should be made to the federal law under which tax-exempt bonds are permitted to be issued:

• No issuance of tax-empt bonds should be permitted for a project that has been brought about by the abuse of eminent domain. The U.S. Supreme Court’s Kelo decision is one of the most unpopular of all its recent decisions (perhaps even ranking above the Citizens United decision). A huge preponderance of the American public strong disagree with it. States around the nation have passed enactments to circumscribe its implications. Even so, there are agencies like this one who would consider using federal taxpayer subsidies to finance such abuse. And the developer-driven abuse that occurred with respect to Atlantic Yards exceeds and was not even likely to have been permitted under Kelo. Unfortunately, the court did not take up the case to rule directly on this. Even as a local matter New Yorkers do not favor such abuse. In 1967 there was an attempt to amend the New York State Constitution to permit eminent domain-abusing projects like Atlantic Yards. The voters rejected it and the New York’s Constitution was never altered to make such a change.

• No bond proceeds should be permitted to fund projects that were not subject to competitive bid. Projects which are not the subject of competitive bid waste public funds and subsidy, breed crony capitalism and destroy democracy.

• Tax-exempt bonds should not be permitted to fund government creation or building up of private monopolies. Monopolies stultify development. They are antithetical to it because true development must partake of a diverse, richly dynamic environment of interacting elements and competitive testing of the best adaptations. Monopolies suppress development opportunities. Furthermore, in the words of Jane Jacobs: “Monopolies established by cronyism and strong-arm methods, along with pervasive extortion and corruption, falsify actual costs” [shall we note they falsify benefits as well?] Enterprises “prefer eliminating competition to competing with . . prices, quality and service.” Tax-exempt bonds are supposed to be issued by “development” agencies to foster development, not suppress it. Government officials shouldn’t replace economic ecosystems with a single privileged crony.

Why should all this be law? Because if these were provisions of federal law tax-empt bonds could not be issued for this project.

These provisions are not yet specifically part of the federal law. What is part of the federal law is that before this agency issues any tax-empt bonds it has to have this hearing so that politicians and legislators, being informed, will be forced to take accountability for doing anything as ill-advised as I have just suggested should be prohibited. If stupid things are then done despite cautions received at a hearing the laws governing the issuance of tax-exempt bonds may then be changed.

I request that HDC inform all legislators and politicians receiving a record of this hearing or inquiring about it that these recommendations were made at this hearing and that HDC further inform them that it is my recommendation any changes to the federal law enacting such restrictions should include provisions making them retroactive, by which I mean that any bonds issued ignoring the principles of these recommendations will retroactively reduce the amount of available tax-empt bond cap available to New York City and New York State. If HDC is going to use its tax-empt bond cap frivolously for a bad project the just and proper result is to take that bond cap away.

Public Agencies and Government Suing Barclays. The building for which HDC is considering issuing tax-exempt bonds will share walls and infrastructure with the Ratner/Prokhorov arena now promoting the name “Barclays.” HDC likely has cause to sue Barclays Bank over its LIBOR rate manipulation scandal. Baltimore and other municipalities in the nation are already suing Barclays. The MTA, another agency involved in the financing of this same Atlantic Yards project coordinating with HDC, has publicly stated that its legal counsel is looking at the Barclays scandal and that it will vigorously pursue “all available legal actions” to protect the MTA. HDC has been unresponsive to my inquiries about whether HDC is similarly looking at suing Barclays. My understanding is that the Barclays matter is under investigation by the State Attorney General. I presume that any presentation to the HDC board about financing this project will include in-depth information about all the possible lawsuits against Barclays that may or will be brought by HDC and other agencies. I believe that the public is also entitled to an outline of what gets described to the HDC board in this regard.

Lack of a Valid Environmental Impact Statement. The Atlantic Yards project is a project for which there is no valid Environmental Impact Statement. That has been judicially determined. This is bad not just because a proper environmental review has never been done: It is bad because the reason it hasn’t been done is that a proper review was sidestepped by fraudulent subterfuge by the developer in connection with which now-chastised government officials colluded. Whether or not there is a legal nicety by which HDC may reason this building can be financed without a proper environmental review it would not be appropriate to do so.

Character of the Developer and Prospective Project Owners. HDC needs to do its “bad apples” review of whether this developer (and prospective property owner) is suitable for the special privilege of receiving HDC financing and subsidy. Forest City Ratner is at the hub of many spokes in a wheel of indictments and various forms of bad conduct. There was the Forest City Ratner Ridge Hill prosecution, Senator Kruger’s prosecution, the recent State Attorney General Investigation resulting in a settlement concerning illegal New York City lobbying activity in connection with development that should have also have included the substantially similar activities in this vein respecting Atlantic Yards. It is not necessary for there to be an indictment or conviction of a developer for an agency to conclude that a developer is an unworthy and untrustworthy recipient of agency subsidy. A pattern of bad conduct and bad behavior and unsavory colleagues is entirely sufficient. And, Forest City Ratner’s pattern of broken promises and subterfuges is also enough.

Mikhail Prokhorov and Chinese Millionaire Investors, Prospective Owners. When HDC does its “bad apple” character reviews it will also have to look at the other prospective owners under the documents. That includes looking at the activities and conduct of Russian oligarch Mikhail Prokhorov and there are also nearly 500 Chinese millionaires expecting to get green cards by virtue of Ratner’s laughable manipulation of the federal EB-5 immigration program. This project has been put up as security for those Chinese millionaires. Thus they can become owners of the project without further HDC approval, or if HDC thinks it has a right to approve them first then those millionaires don’t have the security interest they believe Ratner promised them. The likelihood of such a foreclosure of the Chinese security interest is all the more likely given what may flow from Ratner’s recent loss of the environmental lawsuit: a required consideration of taking the Atlantic Yards mega-monopoly away from Ratner to break it up amongst multiple developers.

HDC Discretion To Reject This Project. The reason this hearing is being held is because the HDC board has discretion which it is supposed to exercise. That discretion should be exercised to reject this project. Approval of this project should not be treated as a forgone conclusion. If the board has any fears that it lacks discretion to turn down this project that feeling that its options have been constrained would highlight significantly the very reasons the cord with this developer should be cut.

HDC Has Already Financed a Forest City Ratner Project. Some HDC board members may reason that they cannot now turn down this project because HDC financed a Ratner project once in the past. Not so. In fact, the bad behavior developer engaged in respecting the HDC-financed building, now known as 8 Spruce Street, should be grounds for HDC to turn down this project. In two blackmailing episodes the developer engaged in behavior that should have chagrined HDC. It blackmailed the local community board for additional subsidy and it also stopped construction on the building, blackmailing the construction unions. Both of these incidents, particularly the latter, should have been considered threats to HDC as well. For HDC to proceed with an approval of this financing after that behavior would constitute HDC’s endorsement of such blackmailing techniques, techniques which are actually typical of the developer and facilitated by its continuing monopoly on development which government, including HDC, should now act to end.

Modular Construction As Broken Jobs Promise To The Unions. There is a possibility of this building’s modular construction, pushing the technological envelope. If not risky, the broken promises to the construction unions this represents are emblematic of how the Forest City Ratner dishonestly ignores commitments respecting its mega-project. Ratner was planning its double-cross of the unions even as he was sharing the stage at the arena opening with union representatives he was praising for their support. I am not arguing that the Ratner promise to the unions is one that needs to be honored. The unions when they supported this project did not look out for the interests of the community and consequently supported an out-of-scale project of very poor design that was detrimental to the community in many ways. Still this promise-breaking should be noted as part of an overall pattern of promises never intended to be kept even as they are made.

This Project Is Immoral. Financing this project is immoral. This project is immoral because tax-exempt bonds and subsidies should not be used to reward, buttress and facilitate eminent domain abuse, crony capitalism, government-sponsored monopoly building and grossly out-of-scale development. But that is not the whole of it.

HDC is comprised of government officials who are supposed to be acting as guardians of the public trust. This hearing is required with that notion in mind. Government officials cannot act to protect the public, they actually lose the ability to do so, if they don’t have bargaining power. Government officials won’t have any bargaining power unless the Ratner monopoly is broken up. The design of this project as a monopoly (and we will remember all the project design came entirely from Ratner) is intended to thwart public agency bargaining power. HDC’s approval of this project would buy into that construct of an intentionally emasculated government by furthering Ratner’s monopoly when HDC has discretion to reject it instead.

HDC should reject this project and allow it to fail. The Atlantic Yards development can and should be taken away from the developer and broken up and distributed among multiple developers. That way the public and agencies like HDC acting as guardians can have some bargaining power and influence over the project as it is developed. That way the community's better UNITY plan (which calls for multiple developers) can be implement and respected.

Assemblyman Hakeem Jeffries has described Atlantic Yards as being presented to the community as a “field of dreams” with the reality delivered being a “graveyard of broken promises.” It isn’t really important which local politician we ascribe such an insight to because they all see it. What is important is to realize that the entire mega-project is fabricated on a foundation of false promises from which Ratner blithely and routinely expects to escape accountability and there can be no reasonable expectation of enforcing delivery of any true benefits from Ratner while Ratner still has the upper hand in a monopoly situation. HDC should have learned a microcosmic version of this lesson in connection with the Spruce Street project.

Scarce Subsidy Delivered to Ratner Is Misdirected. Delivery of scarce-resource subsidy to Forest City Ratner for out-of-scale development hogs and misdirects subsidy that could and should be better used elsewhere, including smaller developers and not-for-profits with a better chance of it benefitting minority developers.

HDC needs to pay attention to the unhappy saga of abuse. None of us has amnesia about Ratner’s misdeeds and we are not about to get it.

• They say that Atlantic Yards meant development?

Well, it’s just not so. . .

And it’s so NOT just.

It meant: Tearing down new construction and valuable historic buildings the community planned to preserve, leaving vacant lots for decades, halting the economic activity construction because it was competing with Ratner in his own backyard.

• They say that Atlantic Yards meant good government? Good procedures, protections for the community, considered carefully weighed decisions. Good government?

Well, it’s just not so. . .

And it’s so NOT just.

It meant falsifying findings to declare this area was blighted. (Even Senator Schumer, a supporter of this project, said that this area, close to his home, where he bicycled, was not blighted,) This project was about illegally giving a mega-development monopoly to Bruce Ratner, over 50 acres of Brooklyn, 30 of them contiguous acres around Atlantic Yards. This was about corrupt courts and agencies rigging the delivery of a wish list of special benefits to a politically-connected developer.

• They say that Atlantic Yards meant creating an affordable housing environment?

Well, it’s just not so. . .

And it’s so NOT just.

It meant tearing down housing that was truly affordable to the neediest, luxury condos, and housing the market was providing for anyway, setting up a Ratner sink-hole to beg for housing subsidies- preventing those subsidies from being used elsewhere and where most needed, Ratner only giving back the minimum that those federal (and local) subsidies always require, not a jot or a tittle more, and it means vacant lots.

• They say that Atlantic Yards meant jobs and employment?

Well, it’s just not so. . .

And it’s so NOT just.

It meant evicting businesses that were providing jobs, fake Ratner “jobs” programs- Deceptions where people even worked for free, strung along by false hope, sidestepping the creation of jobs with cheap, possibly dangerous modular construction, fluffed-up incredibly inaccurate jobs figures, minority and community job promises not meant to be monitored.

• They say that Atlantic Yards meant public investment.

Well, it’s just not so. . .

And it’s so NOT just.

It meant a net negative loss to the public of hundreds of millions of dollars, public subsidies of $2 to $3 billion dollars, including diverted taxes that won’t be paid and will go instead to pay for things like the Ratner/Prokhorov private arena. It means property given to Ratner lying fallow and vacant and off the tax rolls.

• They say that Atlantic Yards meant providing what the community wanted and community empowerment.

Well, it’s just not so. . .

And it’s so NOT just.

It meant fake community organizations, secretly paid for by Ratner, fake community benefit agreements intended as eye-wash and diversions designed to be unenforceable. It meant a developer’s efforts to divide and bamboozle the community, to incapacitate its leadership and strip its people of their power.

I could go on. Ratner was going to create good design and green space? No, it meant super density spot-zoned for Ratner’s special benefit, an arena tightly crammed in amongst brownstones, the seizing and privatizing of public streets, sidewalks and avenues, project-design bait-and switches with (largely theoretical) “green spaces” being ditched in the process.

I could go on, and on, etc. The question is whether HDC will go on with a inexcusable endorsement of this destruction and betrayal?

Sincerely,


Michael D. D. White

PS: Video of a portion of this testimony (below) is available here on YouTube.



Note: This post was updated as of 7/19/2010 to include additional supporting hyperlinks.

Will The MTA Sue Barclays Bank Over LIBOR Rate Manipulation Scandal? MTA Says It Will “Vigorously Pursue All Available Legal Actions”

In follow-up to my story* about which state and city agencies and governments will possibly be suing Barclays Bank in connection with the LIBOR interest rate manipulation scandal and mentioning a long list that are possibilities it is interesting to note that, when contacted, the MTA being on the ball had already given some thought to this subject, enough to have a statement prepared and ready in advance.

(* See: Saturday, July 14, 2012, Will The Empire State Development Corporation (ESD), The MTA, NYC And New York State Sue Barclays Bank?)

Here is the MTA’s comment from MTA Media Liaison Aaron Donovan:

“The MTA has asked its legal counsel to review its options in relation to the LIBOR scandal, and will vigorously pursue all available legal actions. We are outraged about the apparent market manipulation, and will always do everything possible to protect the MTA.”

I have asked the MTA a series of follow-up questions, mostly susceptible to simple YES/NO responses. I will supply readers with the MTA’s response as soon as appropriate. If you want more information about why the MTA and other New York governments might be suing Barclays(like Baltimore and other municipalities around the nation are) for its fraudulent rate manipulation it is spelled out in bullet points in my prior article on this subject.

But there is irony here: As I noted in my original article:

If the MTA sues Barclays it will be suing the bank for which it decided it should name two major New York City subway system stations in Brooklyn (virtually for free, agreeing to take back on the public’s behalf a paltry below-market “$200,000 per year,” a shameful deal locked in for twenty years).

I have also made similar inquiries to other government agencies which probably have reason to sue Barclays (there are quite a few) and am in the process of putting these inquiries to still more. One agency that has yet to provide any response is the New York City Housing Development Corporation (HDC) which, tomorrow, Wednesday at 1:00 PM, is holding a hearing on the first issuance of bonds for the Atlantic Yards mega-monopoly since the issuance of bonds for the Ratner/Prokhorov (“Barclays”) basketball arena. A prompt response from HDC would surely be relevant to that hearing. The Hearing is at 110 William Street. For more information click on the link.

Is HDC, like the MTA, looking at vigorously pursuing “all available legal actions” against Barclays to protect HDC and New York taxpayers? As noted in my prior article, HDC is looking at issuing tax exempt bonds for a building that will, after all, share walls and infrastructure with the Ratner/Prokhorov “Barclays” arena. Should we also say that it will share reputation or disrepute with the arena?

The HDC hearing tomorrow is a key event for one of the few discretionary governmental approvals being exercised for the Atlantic Yards megadevelopment and an important precedent-setting moment. The Barclays arena bonds were relatively unique but this will be the first set of bonds (with a sizable accompanying amount of new subsidy for Ratner) for the entire rest of the mega-project, going a long way to set the precedent for any and all remaining discretionary approvals yet to come.