Wednesday, February 11, 2009

A Brooklyn Paper Editorial & Atlantic Yards: With Nothing Else Good To Say, We Are Stimulated To Say. . .

There is nothing else good to say about it, but we must praise the refreshing honesty of the neighbor-be-damned cynicism with which the Brooklyn Paper makes its case in its new (font-page) editorial: Build the arena — with fed money!, The Brooklyn Paper, February 5, 2009.

The Brooklyn Paper has the temerity to advocate that Brooklynites should want to see federal stimulus funds, intended to rescue the economy, used instead for more of the sort of malfeasance that has propelled us with such force into our current cascade of economic problems. Though the Atlantic Yards megadevelopment will be deleterious to the economic health of Brooklyn and is representative of the worst kind of Wall Street and real estate industry rip-offs that are beleaguering our economy, the paper argues for a diversion of federal money into a billionaire’s pocket for more of the same.

Fattened Up for the Kill

Unlike people such as Kathy Wylde, president of the New York Partnership, who unconvincingly advocates that Atlantic Yards is the kind of countercyclical infrastructure spending that can actually aid in recovery from a depression/recession, the Brooklyn Paper editorial, considered something of a shocker in several respects, pitches its argument in gluttonish-food-language terms not to our atavistic self-serving “lizard brains” but to our “pig brains” suggesting that the table is being set by irresponsible politicians.

The bailout as structured by the House of Representatives appears to put its trust in politicians, whose backroom deals and fealty to special interests make them just as unlikely to act responsibly as the bankers and subprime real-estate promoters who got us into this mess.

Even before the Senate votes, pols everywhere are salivating over the spoils, and we can see where this is heading. . .

* * * *

. . . the bill is packed with pork, whose meat is deemed totally kosher by those invited to the table . .

* * * *

The mayor’s mission now is to lobby for as much pork as the city can digest. .

* * * *

Those requiring government assistance should be offered a chance to bid for their hunk of pork. We should not reject offhand projects that might previously have been deemed unworthy.

In the case of Atlantic Yards, for instance, critics might continue to argue over the larger project’s aesthetics and suitability for a site bridging Prospect Heights and Fort Greene, but complaints over several hundred million dollars in government subsidies are suddenly dated when a trillion dollars is sitting there for the taking. As long as Washington is doling out the gravy, Brooklyn needs to have its plate under the ladle.
Net Negatives

There are many problems with the paper’s argument. Probably foremost among them is that munching on this diet of backroom deals for which the paper suggests we whet our appetites is likely to give Brooklyn a coronary. The paper forgets that the Atlantic Yards megadevelopment is in every conceivable way a net negative for the borough. That includes the proposed arena about which no positive distinctions should be made no matter how the paper structures its case. Arenas do not produce economic benefit, certainly not this one at this location. In other words the Nets are a net negative too.

Trans-fat Equivalents

Bloomberg may crusade against trans-fats in the diets of New Yorkers but the unfavorably enriched mega-deals he is forcing down our throats, larded with no bid hand-outs to developers like Forest City Ratner, are the urban development equivalent of trans-fats, no better for our health and as clogging to our arteries (literally and figuratively).

Wylde Guesses at Keynsian Economics

Not Countercyclical Federal Money

The Kathy Wylde/New York Partnership argument that spending on Atlantic Yards could be an economic plus was palpably reflexive and disingenuous in part because it was made before the expenditures discussed would have been federally funded. Keynsian countercyclical spending is actually not possible at the state level since states cannot print money the way the federal government can.

Not Infrastructure

Also, Atlantic Yards is not infrastructure. One quick way to recognize infrastructure is that, like the Second Avenue subway or the proposed new Moynihan Station, it is publicly owned and benefits the public generally. Atlantic Yards is instead proposed to maximally benefit a single subsidy-sucking developer with a land-grabbing, public-funded blighting monopoly on 22 acres of Brooklyn. General benefit and public ownership are supplanted by the unnecessary infliction of a private monopoly that grows to cover 30+ acres of Brooklyn if you include the other immediately adjacent acreage the public has already assisted Ratner in owning.

A Taste of What Collapsed the National Economy

With federal money now in play, the Brooklyn Paper seems readily cognizant that the economic downturn was engendered by, and that we got “into this mess” through, “backroom deals and fealty to special interests” and the irresponsible actions of “bankers and subprime real-estate promoters.” We heartily agree with this analysis.

Personal Encounter With Glittering Wall Street

Let us speak from personal experience. I worked for decades at the state public finance authorities doing public finance bond deals. One of my jobs was to be on the team that evaluated proposals coming in from Wall Street. That meant a lot of smart, highly talented and well resourced Wall Street investment bankers coming in to make presentations. But a lot of those presentations didn’t, when analyzed, make any sense and this was something we had to be on guard against. It isn’t easy to have a new good idea: Good ideas get around so fast it is hard to have a good idea that hasn’t already made the rounds, but that didn’t prevent firms from coming in to present some extraordinarily bad ideas. The bad ideas would be presented with aplomb and straight faces. Some of them involved extreme complexity and ornateness. Shiny binders with impressive multi-colored charts abounded. I can’t tell you how often it would be that the supposed value of some idea being sold would seem teasingly almost-evident only to have it unravel upon careful analysis to being a black box of nothing. On Wall Street much of what glitters is not gold.

Presentations concluded, we would ask, always politely, . . . so in the final analysis, this: 1.) doesn’t benefit the agency? and 2.) doesn’t benefit the public? Often the transactions involved crisscrossing interest rate risk exchanges, one transaction taking on risk and another to mitigate it perhaps even with this crisscrossing more than once. Some proposed schemes, after lot of abracadabra left you essentially in the same place (minus some fees) and some schemes actually involved undertaking significant gambles when we were in the business of protecting bondholders form risk. The Wall Street firm representatives were polite when their “ideas” were rejected. No doubt that some of the presenters simply valued the “face time,” hoping that we would be more likely to remember how smart they were when they actually did have a good idea to come back with. Still, it is frightening to think, especially when firms came in with some political heft, that if we said “yes” to what they were proposing the agencies might have implemented some of these harmful plans.

“Churning,” Bad for You. .

When dealing with Wall Street we should be on guard against “churning,” which consists of people creating transactions that have no inherent value but from which they will take away fees. On a personal level you might experience churning when a stock broker or financial adviser woos you into transactions the main import of which is that they will receive fees; for instance, selling one set of stocks just to buy others not inherently better.

Real economic benefit involves the steady creation of additional value without the subtractions of unnecessary churning, fees or non-contributing intermediaries. In our personal life, we don’t bite when these intermediary firms call up to offer their services for a fee. Buttressing our suspicions of these intermediary firms willing to sell us their services are the many calls and emails we get from the very same firms offering us employment, the main point which would be to sell our friends, for commission, based on the idea that our friends should pay the firms fees for my/their financial expertise. So they want to both manage my money and hire me to manage other people’s money? My financial expertise? (We like to manage our money in the no-load mutual fund investments available, for instance, through the Vanguard Group).

Bloombergian Investment Banker Model for City Development

So in the financial world of Wall Street, so also in the closely-linked world of publicly financed real estate, at least if you are not on guard. We also remind people that Bloomberg has adopted an investment banker model for city development which is all the more reason to be on guard. It strays from conventional urban planning and good governance wisdom and even farther from the common sense of the highly regarded urbanist Jane Jacobs.

Bruce Ratner as “Churner”

Subsidy-collector Bruce Ratner is prime example of a “churner,” someone willing to take away a fee without delivering value in return. The danger of being shortchanged is greater when dealing with public finance projects that get subsidies because subsidies disguise the lack of fair value being given in return. It is the equivalent of the crisscrossing that allowed the creation of transactions on Wall Street so complex that bright people didn’t fully understand them and why a developer like Ratner, who can’t compete using development and better ideas, attaches himself to the pursuit of subsidies and the cultivation of public officials.

Churn Wounds

Among other things Ratner’s “churning” shows up as formulating a project that involves unnecessary tearing down to build. Lacking good ideas and avoiding development that would be a net positive, he tears down buildings of superior value like the Ward Bakery, the Spalding Building and buildings on Dean Street. In fact, the Brooklyn Paper editorial evidently pays heed to Atlantic Yards’ destruction of Brooklyn:

. . . the open wounds visible at every stalled construction site.

The word “depression” has more than one meaning.
It is not likely that the paper is intending to invoke anything other than the wound of Atlantic Yards, which the paper was convolutedly trying to rationalize.

“Churning,” Bad for the Economy. .

When all is said and done, most of our economic bubbles when pricked leave us ahead of the game. The fiber optics bubble left us with an infrastructure of fiber optic cable. The housing bubble meant we constructed extra housing that will be around for a long time to house and lower the cost of housing. However, the Wall Street bubble has been especially hazardous to our economic health because, with all the churning, it is not clear that when the bubble is pricked, anything of value was created to be left behind. People are still running from the “toxic assets,” the measure of whose poison they cannot assess. Buying into the idea Atlantic Yards megadevelopment involves the same kind of churning that, net net, leaves us poorer than we started out. Money may be splashed around but it doesn’t create.

Churning and the Redistribution of Wealth to the Wealthy

Wait! The analogy doesn’t end there. Our Wall Street debacles ended up with another untoward result, a regrettable redistribution of wealth left in the hands of the churners. The Atlantic Yards churning is also about the redistribution of wealth from the middle class and ordinary taxpayer to wealthy Bruce Ratner and his development company.

The Depression’s Frozen Monopoly Game

One analysis of the Depression was that it was preceded and provoked by an over concentration of wealth at the top. Analogous to the freezing up that occurs at the end monopoly game, the economy couldn’t move because the wealth was too concentrated in too few players. There was need and want during the depression: At the same time there was also a problem with deflation because that need and want could not be economically expressed by the poor who were experiencing that need and want. If this theory is correct, then it is likely no accident that the current melt-down has been similarly preceded by a new concentration of wealth. If the theory is correct, practices that fleece the public to build up the mega-rich like Ratner would then only exacerbate our problems. If the theory is incorrect, it is still no reason to fleece the public to build up Ratner’s wealth with churns that do harm or, at best, produce no value.

Brooklyn Paper’s Anomaly: Backroom Deals

The Brooklyn Paper editorial is shocking, in part, because it is such an anomaly. The anomaly can be seen on the front page where the editorial appears. There it is reported that the paper just picked up five more awards in five editorial and design categories (See: February 2, 2009, Simply the best! Brooklyn Paper wins five more top awards) proudly crowing that one of its first place wins was for a recent editorial that used criticism of Atlantic Yards as its launching pad to say that Ratner should not receive “more backroom deals” (December 1, 2007, Editorial: Another backroom deal). Some of what the award winning editorial said:

. . . Ratner’s completely out-of-scale skyscraper park at Atlantic Yards in the low-rise Prospect Heights . .

* * * *

Ratner’s people aren’t talking, either — more secrecy from a developer who has made his living by partnering with public entities on projects, like Atlantic Yards and Metrotech, that are approved outside the normal and rigorous city land-use review process.

All developers make promises, and some of them fall short some of the time. But Ratner has fallen short most of the time, and has been paid handsomely for each insult. From the government-subsidized sterility of his fortress-like Metrotech (with its unused retail spaces and poor job-creation numbers), to the government bailout at Ratner’s pathetic Atlantic Center Mall, to the ever-rising taxpayer subsidy that underwrites his shell game at Atlantic Yards, there has been no accountability. Government keeps on partnering with Ratner — not only on the projects, but on the clandestine planning process, too.
We too have been mostly complimentary about the paper's editorials though not always. (See: Wednesday, February 4, 2009, Reject the “Bundle” Bungle: Saying “No” to Walentas Dock Street Project Next to the Brooklyn Bridge.)

Brooklyn Paper's Weintrob on Weintrob: Nets Arena as a “Masterful Diversion” for a “Problematic, Oversized” “Land Grab by Ratner and His Political Clients”

The editorial is also an anomaly since most editorials in recent years have been written by its editor, Gersh Kuntzman, whereas this editorial was signed by its publisher, Ed Weintrob. But it is even an anomaly for Mr. Weintrob to be writing in support of the project. We went back in time to the years when Mr. Weintrob was writing editorials more regularly. His own earlier editorials specifically against the megaproject were also quite inconsistent with his surprising new one.

The publisher’s new 2009 Brooklyn Paper editorial seems to try to make a distinction between Atlantic Yards as a megadevelopment whole and just the Nets arena, pretending that somehow it is possible to suggest a “jumpstart” of the “baskeball arena” (in its “original” form?- More on this later) with “federal stimulus cash” even while maintaining that the “most problematic, oversized components of Bruce Ratner’s proposal for Atlantic Yards should not be built, no matter how much federal money is being thrown around.”

That argument ignores the fact that the arena has been used as the highly inappropriate argument for Ratner to land-grab a multi-acre monopoly swath of Brooklyn. As flawed as the argument is, unscrupulous politicians such as Mayor Bloomberg and Borough President Markowitz are bound to continue to argue for Ratner’s 30+ acre monopoly if the arena proceeds. And the rest of the problematic, oversized megaproject now facing well-deserved adversity is much less likely to be defeated if the arena-coddling rationale is supported to get it a successful start. This is as silly as jump-starting a car for a burglar making off with the family silver, expecting it will be handed back just as soon as he gets locomotion.

An earlier editorial, again signed by Weintrob as publisher, acknowledges the ploy of the stadium. In The real story is the land grab, not the Nets (January 24, 2004) Weintrob, writes:

The real story is that the Atlantic Yards project — and its companion Downtown Brooklyn Plan — is not about the Nets (whose stadium would occupy a tiny part of the massive site), it’s about a land grab by Ratner and his political clients, the largest, most expensive government seizure of private property for private benefit ever in Brooklyn.
In May, Weintrob, signing still another editorial, reinforces the point (emphasis supplied):

Bruce Ratner’s Atlantic Yards plan (it’s not just the Nets). This project gets a free ride on city approval. With the MTA apparently in Ratner’s pocket, only lawsuits may stand in the way of an ill-conceived vision. (The Nets arena, a tiny part of the Ratner-Downtown steamroller, is a masterful diversion meant to detract attention from the larger plan’s specifics.) Atlantic Yards would permanently separate the neighboring communities of Fort Greene and Prospect Heights with a high-rise, de-mapped dead zone in the spirit of Ratner’s walled-in Metrotech office complex.
(See: May 1, 2004, Support progress—reject the Downtown Plan, by Ed Weintrob, Paper founder.)

The Developers’ Mantra That Ain’t So

The editorial has other related points to make:

The “developers” and their tagalongs have their mantra down pat: Give them carte blanche to take whatever land they want, build whatever they want whenever they want, take whatever government subsidies they want, then rest assured — there will be jobs and prosperity for all.

If only the advertised conclusion was true.

Major decisions are being made right now that will either doom Brooklyn to a cold, dehumanized future incorporating the worst elements of suburbanization and Manhattanization, or offer our communities the opportunity to thrive and grow on a humane scale.
Yet in his newest 2009 editorial Weintrob disregards his own 2004 cautionary words. This time he buys into the “advertised conclusion” of the developers' mantra: “Constructing the arena and bringing the New Jersey Nets to Brooklyn would quickly create construction jobs, boost the commercial district along Flatbush Avenue.”

Yet, according to Weintrob’s May 2004 editorial this:

. . would constitute the biggest, most costly land grab in Brooklyn history and would likely leave us poorer both financially and spiritually. .
Headed to the Poor House: Raiding Public “Treasuries” (Plural)

A year later, in July 2005, Weintrob, in another signed editorial, continues to be concerned about the cost to the government and the public and he calls for the press to do its job to oppose the boondoggle (See: July 9, 2005, It’s all about money, by Ed Weintrob, Paper founder):

Whether Bruce Ratner gets to build his Atlantic Yards mega-project rests . . . on government’s willingness to put our treasuries at the developer’s disposal.

* * * *
The issue is that taxpayers are being asked to pay for Ratner’s game.

* * * *

On the eve of America’s independence anniversary, we ask New York’s high-falutin daily news media to do its job.

Simply report the news about Bruce Ratner’s project. Stop being the developer’s tool — and his fool.
If we are not to be Ratner’s fools, why is it any better to advocate robbing from the federal treasury than from “treasuries” (plural) of the city and state? Among other things, the addition of federal money does not mean city or state money would be subtracted out of Ratner’s project.
Why also does Weintrob suggest in May 2004 that a “costly land grab. . will leave us poorer . . . spiritually” while in 2009 he says it will “restore the spirit of optimism.”

Will a False Choice Play with the Peoria-minded?

The new 2009 editorial seeks to offer a false choice to rationalize why we should try to steal these federal funds:

Bottom line: If we don’t get the money, Peoria will.
That’s not true. Getting money for Ratner only takes money away from other New York projects that are truly infrastructure and that would truly benefit the city and state, projects like the Second Avenue subway, the extension of the #7 IRT subway line to the west side of Manhattan, Moynihan Station, Brooklyn Bridge Park, Governors Island, the PATH tunnel to New Jersey and and the new water tunnel. Further, Atlantic Yards would not only be a net negative harmful to Brooklyn, it would be one that would also sap city and state dollars.

“Shovel-ready” vs the Security Threat of “Shoving it to the Public”

The arena is also not, in the current fashionable lexicon, “shovel-ready.” For example, the new 2009 Weintrob editorial talks about jump-starting the “original” arena that was talked about, but the arena has to be redesigned: The developer and ESDC, the “responsible” state authority overseeing the project have finally admitted that redesign of the arena is necessary because of security concerns. Of course, that is only one reason the project not presently “shovel-ready.”
Federal stimulus money will only have the effect of making the project “shove-it-to-the-public” ready: It will not result in immediate construction jobs the way that the other aforementioned competing New York projects will.

Weintrob Hankering to Defeat Obama?

One must almost wonder whether Weintrob’s suggestion that the federal stimulus bill be laden with Atlantic Yards pork is a surreptitious (unpatriotic) attempt to defeat or delay the federal stimulus package. The stimulus bill is controversial and unpopular enough. Wouldn’t Weintrob’s objectionable reasoning based on the promotion of swinish rationales undermine President Obama and his legitimate supporters? We imagine that with something as noisomely porkish as Atlantic Yards in the bill people would point to inconsistency and aver that Obama’s exhortations of better government were mere empty rhetoric. We refer you to President Obama’s inaugural address to think about how what he said then relates to Atlantic Yards: (See: Thursday, January 22, 2009, Obama Inaugural Address: National Themes and Atlantic Yards.)

Prescription for a Downward Economic Spiral

We have been reading Amity Shlaes’ new history of the Depression (a New York Times bestseller), “The Forgotten Man” which is about how long the Depression played out over time and how not everything that was done in the name of lifting the nation out of the Depression was serviceable in doing so. Ms. Shlaes makes the case that much of what government did was unwittingly counterproductive. Indeed, a fair amount of what Roosevelt free-rangingly and experimentally tried lacked common sense and consistency.

Ms. Shlaes tells her panoramic story using a cast of individuals. One of those to whom she keeps returning to as an exemplar of what straightforward private enterprise can achieve, benefitting all, was a cousin of ours, industrialist, banker, philanthropist and former Secretary of the Treasury, Andrew Mellon. (Our grandmother, who came to the U.S. from County Tyrone Ireland, was Margaret Dorothea Lockhart Mellon Kelly and her mother Margaret Rose Mellon.) In part of the tale she tells, Ms. Shlaes recounts how Mellon, toward the end of his life, generously created the National Gallery of Art in Washington.

Ms. Shlaes may simplify somewhat for the sake of telling her panoramic story but early on she describes how Mellon grew his wealth:

Mellon had stayed close to his father’s original formula: thrift that emphasized the accumulation of capital. But he had also created value- - and not merely by cornering a market as a robber baron would, though he had done this with bauxite. Mellon invested in new innovations, functioning as an early version of the modern venture capitalist. The magazine “World’s Work” described the Mellon formula thus” “Find a man who can run a business and needs capital to start or expand. Furnish the capital and take shares in the business, leaving the other man to run it except when he is in trouble. When the business has growth sufficiently to pay back the money, take the money and find another man running a business and in need of money and give it to him on that basis.”
In other words Ms. Shlaes describes a cycle of finding and rewarding economic success. We find that the Brooklyn Paper, in its 2009 editorial advocates the exact opposite. It advocates a cycle of finding and rewarding what we know doesn’t work economically.

By advocating that federal stimulus funds, intended to rescue the economy, should be used instead for more of the sort malfeasance that has propelled us with such force into our current economic problems, the Brooklyn Paper would seemingly take us into an ever-descending spiral of economic failure.

President Obama has famously been quoted as saying “We are ready to lead once more.” (See the cover of Newsweeks’ commemorative edition.) Is this downward economic spiral where Mr. Weintrob would have him lead?

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