There are provocative ideas circulating among the Occupy Wall Street protestors. Maybe with respect to one idea, a very powerful one, we can take heed, but start small by considering a basic essential: Is the Federal Reserve on the public’s side?
Visiting Occupy Wall Street you will probably see, as I did, the placards calling for elimination of the Fed, (aka the “Federal Reserve” or “Federal Reserve System”). That’s also something that Ron Paul, more frequently thought of as closer to the Tea Party side of things, is calling for. Indeed, hostility toward the Fed is a theme that is also circulating amongst the Tea Party activists and activists invoking the Tea Party label (how does one differentiate and how critical is it to do so?).
That's not to say that all those out to earn Tea Party credentials and endorsement are opposed to the Fed. Herman Cain was chairman of the Kansas City Federal Reserve Bank in the mid-1990s. (See: Herman Cain: Federal Reserve Chairman, Tea Party Champion, by Joshua Green, May 27 2011.)
Eliminate the Fed? GULP! That would be a big step. It’s really hard to get one’s mind around what it would mean in terms of the economy. And the belief of some that eliminating the Fed would be good because it would be better to regulate the money supply by a return to the gold standard is scary: How much gold you have isn’t a measure of true societal wealth. Among other things you can’t eat it.
(Below an interfaith protest arrives Sunday with their version of Wall Street's "bull" being the bible's Golden Calf idol.)
We understand concerns that the Fed has a lot of power, that while it functions as if it is one of the most powerful organs of government it is not readily accountable as other branches of government are supposed to be, that it is in technical terms essentially a private entity.
Although it is embedded in the nation’s political history the Fed is a entire branch of government you can’t find in the Constitution.
The origin’s of the Fed go back to the creation of federal central banking via the famous Hamilton, Jefferson Dinner Table Bargain of June 1790 whereby the other side of the agreement was to locate the U.S. Capitol in Washington D.C. (The Constitution also doesn’t say where the capitol of the U.S. should be. Before D.C. it was located in Philadelphia and New York City.) Though the compromise may have traded away New York City’s then status as the official political capital of the U.S. via the compromise, Hamilton, then the Treasury Secretary (Jefferson was Secretary of State) secured for New York the de facto status as the nation’s financial capitol from then on.
Take the big step of eliminating the Fed? Maybe we could start with the smaller step of looking at who are the Federal Reserve Directors and whether they can be counted upon to serve the public interest. As mentioned above: Herman Cain?
(Above Federal Reserve Directors Kathy Wylde and Lee Bollinger both of whom are key backers of neighborhood-seizing eminent domain abuse to benefit government assisted monopolies.)
More important, I have previously pointed out with some anguish that the Federal Reserve Bank of New York has on its board two directors, Kathy Wylde and Lee Bollinger, both with one thing conspicuously in common: They have both been key in backing the neighborhood-destroying seizure of land through eminent domain abuse. At the expense of community interests they have endorsed those seizures for the sake of governmentally assisting politically-connected private mega-monopolies. This is some of what I previously wrote:
Regarding Director Wylde:
Kathy Wylde, whose most high-profile recent actions have been to go out of her way to promote Atlantic Yards, the megadevelopment on track to be one of New York’s most conspicuous money-losing failures. (See the July 27, 2009 story in Crain’s.)
* * * *
Ms. Wilde has been president and chief executive of the Partnership for New York City for some time and was prominently in the news in the (pre-fiscal crisis) summer of 2008 as a supporter amongst the inner business circle strategizing for Mayor Michael Bloomberg’s overturn of term limits to get a surprise third term. Wylde effused that the business world was “primed” to help him. (See: Bigs Back Law Change to Keep Mike, By Angela Montefinise, July 27, 2008.) . . .
Wylde Support of Economic Mega-Losses for NYC
A spectacularly flawed project in almost all respects, New York City’s Independent Budget Office has concluded that the Atlantic Yards arena, the only part of the Atlantic Yards project currently designed or for which any kind of enforceable, documented deal exists will be a net money loser for the city to the tune of $220 million($39.5 million in direct losses and $180.5 million in opportunity losses). The megadevelopment’s guaranteed inadequacies flow principally from the fact that it was set up and concocted by the developer, Forest City Ratner, as a subsidy-infusion system intended to deliver maximum benefit to the developer at the expense of the public. The IBO has conservatively calculated that on the arena alone the city will be giving the developer$726 million in no-bid giveaways.
Regarding Director Bollinger:
Lee C. Bollinger, President of Columbia University. One of the three highest paid presidents at a private university ($1.4 million annual compensation package), Mr. Bollinger has spearheaded Columbia’s usurpation of West Harlem using eminent domain to gain a multi-decade monopoly shut-out on the real estate there, very much like Atlantic Yards.
The Tea Party tends to focus its anger at government. Occupy Wall Street is focusing anger more directly at Wall Street. Both groups ought to be properly directing their anger at the double-whammy you get whenever government steps in to support Wall Street and/or to specially benefit politically connected monopolies and elites. We see it far too often. Indeed, the shared objections to the Fed is that it is a private entity usurping government prerogatives and functions to favor private interest over public interests.
So, if the Fed is going to be kept around do we want it to have directors like Wylde and Bollinger who readily endorse the kind of abuse favoring the 1% over the 99%?
Not mentioned in the previous Noticing New York post is that the Times article had this very interesting tidbit:
For his part, Mr. Bloomberg seems aware that symptoms of “third-term-itis” have manifested themselves. For weeks now, he has been using his own money to pay for campaign-style advertisements, nominally to bolster his battle with the teachers’ union, but widely taken as an effort to lift his sagging approval ratings.
I caught one of these personally financed Bloomberg “campaign-style advertisements” the other day (it ended with the legend: “Paid for by Michael R. Bloomberg”). Whether it was nominally or otherwise intended “to bolster his battle with the teachers’ union” or “an effort to lift his sagging approval ratings” it, surprisingly, prominently devoted precious moments of its 30 seconds to promoting Bloomberg’s big, city-assisted real estate developments. We are able to discern that the ad is talking about such real estate developments from the assisting visuals (see above/below) even though the projects are euphemistically referred to obliquely only as “critical job creation projects.”
Bloomberg announced just today that he is forming a "campaign committee" to oversee his spending to promote his positions and that his spending, to date, is in the "upper six figures." Does that sound like it's about to hit one million dollars? Mailers have also been landing in peoples mail boxes but, so far, not ours.
Surprise: The Best Defense for lack Of Project Headway?
It is a surprise that Bloomberg should be promoting his city-assisted real estate developments given that Bloomberg, now into his third four-year term, has made so little headway with any of his mega-development dreams. Truth to tell, most of the `jobs’ they have so far created have been only for those in the demolition trades. With all the demolition it is perhaps not so surprising that New York is not growing anywhere near as fast as Bloomberg expected. After all, the necessary corollary to “if you build it they will come” must certainly be, “if you tear it down they will leave,” certainly if you don't replace what you tear down.
During the era of Robert Moses, another famous tear-down artist (or should we say tear-down “mad scientist” rather than “artist”) the population of the city shrank dramatically. To be completely fair, Moses was also building a lot during this era, though much of it for cars that helped accelerate the departure from the city Moses' other policies were helping to foster. The projects initiated under Bloomberg have all so far involved mostly just destruction: Atlantic Yards, Willets Point, the Columbia University’s takeover of West Harlem, Coney Island. Hudson Yards on the West side of Manhattan does not involve destruction except to the extent that its oppressive scale will likely detract from the benefit it will provide long term. But even though that particular mega-project did not require any Bloombergian-brand destruction to proceed, it has not preceded.
Even the most necessary projects that Bloomberg was handed as relatively ready to go when he took office have languished, Moynihan Station (which could be helping to jump-start the languishing Hudson Yards) is one key example. The very slow-proceeding replacement of buildings at the World Trade Center site should also be mentioned as one of the most unfortunate examples of a blank slate. We are now approaching the tenth anniversary of that site’s demolition and Bloomberg, who took office only months after 9/11 has been in office almost that entire time. Bloomberg’s focus in that neighborhood was: i.) sending federal Ground Zero funds to his pet Waterfalls project, and ii.) the special benefits and variances his administration gave allowing an extra large Goldman Sachs building to go forward across the street from the Ground Zero site where it would override and diminish the quality of the carefully thought-out Battery Park City plan while competing with the Silverstein Ground Zero buildings.
Similarly, Brooklyn Bridge Park was ready to proceed when Bloomberg took office but Bloomberg only got started with it when he was electioneering for his third term. See: Monday, May 24, 2010, Looking a Gift Horse in the Mouth? An Examination of Brooklyn Bridge Park in Terms of the Politics of Development, Part I. And attention to proceeding with building upon the vacant riverside expanse at Queens West was neglected while the Bloomberg administration preoccupied itself with the Olympics bid and what it might tear down elsewhere.
Surprise: The Best Defense for lack Of Jobs?
It is also surprising that Bloomberg is advertising his languishing city real estate projects as “job creation projects” given that, for instance the Atlantic Yards arena is now mainly famous for the jobs it isn’t creating while the housing to be constructed is now conspicuously in the news for the cutback in jobs associated with the developer’s announced intention to shift to modular construction, building the tallest modular building in the world (if this pushing-the-limits of technology is permitted), and perhaps making the densest area of North America a forest of such units.
Even if one focuses on the construction industry jobs stimulated by the Bloomberg administration’s massive up-zonings of certain areas around the city, those temporary construction jobs must, in areas like Williamsburg, be weighed against the many blue collar jobs were simultaneously lost with the abrupt and total zoning changes that were passed. Now in Williamsburg there is an oversupply of new luxury units along the water while just a little further inland we witnessed a wholesale abandonment of new residential construction projects (caused by the financial crisis) lying fallow on formerly occupied industrial sites that provided the kind of jobs and economic activity that would likely have survived that downturn.
How NOT to Produce an Affordable City
It is true that economic growth fosters population growth, but perhaps more important, population growth (and sometimes economic growth) is spurred by affordability. There are only so many wealthy people in the world. The parts of the country growing the fastest are generally where new residential units can be produced quickly and cheaply. In theory, the Bloomberg administration is interested in generating many new units in order to foster growth. But Bloomberg’s destructions do not necessarily result in an increase of affordable units. They are more of a churn, or something worse. Atlantic Yards provides a sorry example.
Atlantic Yards involves tearing down existing housing units, many of them exceedingly affordable, and replacing them, in time, with a greater number of less affordable units. While those units will be replaced in time, in the interim they are being replaced with nothing at all. (The interim will involve several decades during which we can measure an associated population drop.) Even if the units are eventually replaced as planned they will be replaced by diverting and misallocating housing subsidies from other projects where those subsidies could be more effectively used to provide more affordable housing (more of it and at lower cost) without the destruction of existing units involved at Atlantic Yards.
The Percolated Popping of the the Population Projection
Bloomberg’s preoccupation with a predicted growth of the city’s population began at the very beginning of his second term. At his second inauguration on January 1, 2006 (lack of progress building at Ground Zero was already an issue) Bloomberg made the point then that, “our population is at an all-time high.” That same month Bloomberg disclosed that city planners were drafting a strategy to deal with this expected growth and then in mid-February the administration officially announced that the population was expected to go from what the administration then estimated was a record 8.2 million at that time to nearly 9.4 million in 2025. (See: By 2025, Planners See a Million New Stories in the Crowded City, by Sam Roberts, February 19, 2006.)
Was the city’s population then really the 8.2 million the administration says it was in January of 2006? The brand new census figures state that the city’s population grew only 2.1% in the last decade and is currently 8.175 million, lower even than what the administration estimated in 2006. The Bloomberg administration is disputing the new census figures, in part because the lower than predicted numbers found by the census may cause the city to lose aid, but there is thinking that these numbers may be right. Back around the time the city promoted its 8.2 million estimate it had also been disputing lower numbers found by the census and lobbying the Census Bureau for revisions to adjust the numbers upward, with success. According to the Times, writing in early 2006:
The latest official census figures actually showed a slight decline in New York State's population. But, on the basis of housing construction, the city has successfully challenged recent city estimates, and the Census Bureau has accepted the city's figure of 8,168,338 as of 2004.
No matter whose figures you take that would mean that the city population has been hovering at a nearly unchanging level since 2004.
The census had accepted the boost to that 8,168,338 in the fall of 2005 based on statistical work done by the director of the population division of the Department of City Planning, and his colleagues in other branches of city government, Joseph J. Salvo, and according to the Times, “his colleagues in other branches of city government.” (See: With New York Help, Census Finds 64,000 New Yorkers, by Sam Roberts, October 4, 2005.) These administration officials found another 64,259 New Yorkers (“as many people as live in all of Santa Fe, N.M.,” points out the Times) not by use of statistical sampling, but instead uncovering “housing units and people that the census had missed.”
The Times article quipped:
The revisions have also propelled Dr. Salvo's name into the lexicon of American demography. John H. Mollenkopf, director of the Center for Urban Research at the City University of New York Graduate Center, called it "the Salvo effect."
The problem, in retrospect is that the census is unlikely to have missed the same units all over again when doing the new census just out. Also, back then the figures were interpreted to mean that as contemporaneously reported by the Times, “between April 2000 and July 2004, the number of New Yorkers grew by a total of 160,060, or 2 percent.” In other words, in four years the city was supposed to have grown the same 2 percent it is now suspected the city actually grew in the entire last decade.
The census now estimates that the city grew only 2.1% in the last decade. At that rate, it will take the 8.175 million population the census now estimates to be the city’s population until the 2080 decennial census to reach the 9.4 million figure the Bloomberg administration, in 2006, estimated the city would reach in 2025.
When in February 2006 the Bloomberg administration released its prediction that in the next 19 years the city would grow by another 1.2 million those projections were closely linked with Bloombergian rhetoric calling for major development throughout the city. In April of 2007 the Bloomberg-projected growth was included in the unveiling of the what is referred to as Bloomberg’s 2030 Plan or PlaNYC Although the Estimate of Growth Was Ever So Slightly Moderated. (See: Mayor to Unveil 25-year Outline for Greener City, by Diane Cardwell and Charles V. Bagli; William Neuman contributed reporting, April 20, 2007.) The Cardwell/Bagli times article about the mayor’s Earth Day hyped new plan opened with the population projection:
With New York's population expected to grow by one million in two decades, Mayor Michael R. Bloomberg will call on Sunday for a raft of ambitious and sometimes contentious proposals that are intended to ease traffic congestion, reduce air pollution, build housing, improve mass transit and develop abandoned industrial land.
Let’s see: 2007 plus two decades would be a population of about 9.4 million by 2027. The Mayor’s actual website for the plan is only a tad more circumspect in its estimates:
Our spectacular recovery has catapulted population to a record high - 8.2 million. By 2030 more than nine million people will live in New York.
Interestingly, since the new contradictory numbers were released by the Census Bureau the city has changed neither this text nor the accompanying chart showing the city reaching about 9.12 million in 2030. (See image below.- If corrected the second green triangle approximately over 2010 should be down more or less level with the blue square over the year 2000.) (Chart from PlanNYC website.)
Bloomberg's Record on Statistics
Inaccurate representation population statistics should be added to a growing list: While the Bloomberg administration proudly revels in its image of having a hard-nosed statistics orientation, in October of 2009 the Times ran three separate stories about different areas where figures being provided by the administration diverged from reality. Its numbers were reportedly off in the areas of: School test score improvements, addition of affordable housing units (as many were being lost as created), and the lack of job creation and quality job creation.
Bloomberg’s police statistics are also in question.
Arguments For Growing the City Are Good
It is not that development and growth in New York City isn’t a good thing. It is. Among other things, more people living more densely in cities is good for the environment. Also, as Jane Jacobs pointed out in her Economies of Cities, city dwellers are also more economically productive and creative of new technologies. Much of the entire world economy takes place in very short list of the world’s largest cities. The world’s largest 150 cities account for only 12 percent of the global population right now, but they account for 50% of global GDP (“Gross domestic product”) or economic activity and that percentage is headed even higher. (See: How much global GDP do the world's 150 largest cities account for?, Marketplace Morning Report, Wednesday, April 13, 2011.) GDP isn't a perfect measure of value but that figure does communicate the gist of the idea that cities are productive places.
So there are reasons to strive to allow New York City to grow. But there are plenty of opportunities for the city to grow without the accompanying Bloomberg-style destructions.
The Absence of Population Growth Under Bloomberg
Why hasn’t the city grown significantly under Bloomberg even as he announced that this is what he has been directing his efforts towards? The February 2006 Times story initially announcing Bloomberg’s grand projections contain a clue, a quote from Robert D. Yaro, president of the Regional Plan Association:
“One way to keep these forecasts from happening is to make it prohibitively expensive to live and work here.”
This is essentially a pithy recap of what we reviewed earlier in this post with the precept that population growth (and sometimes economic growth) is spurred by affordability.
Is New York getting to be a more expensive city? Here is another window into the economy from September of 2007 to help answer that question:
Since Mr. Bloomberg took office in 2002, the city budget, adjusted for inflation, has swelled faster than it has under any other mayor during the last 27 years, increasing by 23 percent, to $60 billion.
By contrast, spending rose 8 percent during Mayor Rudolph W. Giuliani’s eight years, and 4 percent under Mayor David N. Dinkins, who served one four-year term. Mr. Bloomberg’s spending also outpaced that of Mayor Edward I. Koch, who increased the budget by 19 percent over his last two terms.
The point is not that Bloomberg increased spending 23 percent when the population was increasing less than 2 percent. The point is that he was able to do it and how he did it. He increased borrowing (which was appropriate after 9/11) and eventually raised taxes, fines and fees. The thrust of the above Times article is that Bloomberg’s salvation for all the extra spending was on the revenue side:
“He does look to the revenue side to meet needs,” said Charles Brecher, research director at the Citizens Budget Commission, a business-backed research group and a co-author of “Power Failure,” which studied New York politics and policy from 1960 to the early 1990s.
The revenue came mainly from the economy which is to say that it came from the concurrent Wall Street and real estate booms. Much less came from new fees and taxes:
Although the rise in revenues is overwhelmingly due to growth in the economy, roughly 15 percent of the increase resulted from Mr. Bloomberg’s imposition of new taxes* and fees, primarily the property tax increase, according to an analysis by the Independent Budget Office, a publicly financed research and policy agency that does not report directly to the mayor.
(* On of the subheads that appeared on the screen during Bloomberg-financed commercial was “No New Taxes”.)
Ironically, at the time Mark Page, then the city’s budget director, posited that there was “a major increase in revenue that has enabled us to cut taxes and spend more” resulting from a growth in the economy and the population. There have been a few things Mark Page wasn’t right about but given that it now looks like the population apparently wasn’t growing significantly, for Mr. Page to be at least partly right about this assessment of the city’s budget dynamics which he was in charge of understanding, revenues must have grown without the population growing.
There are two not so comforting answers to how this could be so. One is that, as Noticing New York assessed before, much of the revenues were short-term, up-front revenues derived from the real estate building boom. That is a problem because this short-term revenue is taken in all up front and as it is fluctuating or volatile it can at any time cease for long periods. It is also a problem to the extent that the revenues are derived from (and place a premium on continuing) a churn where existing city assets that are torn down are not necessarily replaced with assets that are equal to or better than those being lost. (Remember that with Atlantic Yards and the Columbia takeover of West Harlem there will be long intervening periods when we will get nothing.)
The other discomforting answer is that the revenues have been coming from the super-hyped up Wall Street economy. That economy, which faltered briefly during the financial crisis before it was saved by a rescue package targeted to its preservation, may one day suffer more permanent setbacks. Some of the ubiquitous new hedge funds may be creating and exporting world-wide value depending upon their particular operations. But surely others may be better compares with high-stakes gambling operations that reshuffled wealth to those spinning the wheel. How long are we to rest assured that these routines will be permitted to continue?
Surely push-back against the industry is a possibility when the operations of our urban financial centers are viewed as exporting to the rest of the country, and other nations like Iceland and Ireland, the impoverishment of crashing bubbles.
More Rich New Yorkers, A Group Apart
In the meantime those hedge funds pay taxes and generate some very rich New Yorkers. That does not necessarily mean that the city is more affordably attractive for the rest of us. Though the Wall Street incomes are going up, New York Area Median Income (the mid-line income level that 50% of us are above and 50% below) has been relatively stable. The annual median income figures that HUD uses to determine housing program eligibility have the New York area’s median income going up 10.85% (before adjustment for inflation) from year 2000 to year 2010, from $56,200 to $62,300. (The HUD figures involve occasional anomalies too complicated o explain here but these figures are fair and representative for the discussion here.) Meanwhile, according to figures from Edward L. Glaeser, whom we will say more about in a minute, average per worker income in Manhattan (total salaries divided by population) has been going up at a far faster rate than nationally and far faster than the area median income figures just recited:
Between 2000 and 2008 (the latest year available from County Business Patterns) payroll per worker in Manhattan increased by 35 percent (7.8 percent in real terms — that is, after adjusting for inflation) to $102,000. Over the same period, national payroll per worker increased by 25 percent (for no real gain) to $42,000.
Glaeser’s figures are only the 2000 to 2008 years available to him. The HUD New York area median income figures for those same years went up from $56,200 to $59,700, or 6.22% compared to the 35% average income figure increase presented by Glaeser. Glaeser points out that in real terms, after adjusting for inflation his figures represent a 7.8% increase. After adjusting for inflation the HUD figures represent a 14.2% decrease in buying power. While these figures may be challenged as less than perfect for exact comparisons they clearly do well enough make a point that people probably generally sense anyway, that measurable incomes are going up at the upper end of the New York income spectrum with the average salary being dragged up by Wall Street’s salaries but declining for the typical Joe.
Edward Glaeser, an economics professor at Harvard, blogging in the Times notes three things about the residential unit count in New York City that explain the population’s rise by a mere 167,000 individuals in the last decade:
1. “the city ended up adding only 170,000 units over the decade, a 5.3 percent increase”
2. “Typically, population increases by a few percentage points less than the housing stock increases because of shrinking household size”
3. “the city’s measured vacancy rate increased to 7.8 percent in 2010 from 5.6 percent in 2000, which means 80,000 fewer units being occupied” (In other words of the only 170,000 units added over the decade there was a net addition of only 90,000 occupied units.
One thing to note about the 7.8 percent vacancy rate Glaeser cites is that it is an average vacancy rate and that, because of rent regulation, vacancy rates tend to be higher at the upper end of the market where market prices prevail more often rather than being held artificially low in the case of many regulated units. That means that an even greater proportion of the vacant units are likely to be amongst the new supply of luxury units added by the Bloomberg administration policies.
Luxury living also suppresses population in relation to the housing supply in another way: Disproportionate increases in wealth can also effectively empty space (akin to what you get with shrinking family size) when, for example, the wealthy hedge fund manager decides to empty a Brooklyn Heights building that was previously occupied by ten families in order to reoccupy it with his or her family as a private townhouse, or similarly when a wealthier family buys and intends to occupy three apartments in a cooperative rather than one. If the market isn’t building additional units for the people getting pushed out the result will be higher housing prices and/or people leaving the city.
There is a theory about adding to the housing supply known as “filtration.*” It is a rough cousin to the theory of “trickle-down economics.” The idea is that the superior purchasing power of those in the upper end of the market can be harnessed to generate the construction of additional new housing units (much like construction the Bloomberg administration considers it is fostering) and the rest of society can benefit as older units are cast off by the upper classes. But this theory isn’t going to work the way it is supposed to if disproportionate increases in income at the upper end of the spectrum result in proportionately greater consumption of housing by the wealthy, say for example by buying infrequently occupied pied-à-terres.
(* “A survey that he conducted when he was a city housing official, Dr. [Frank S.] Kristoff [formerly chief housing economist in the Wagner and Lindsay administrations] said, showed that there were 2.4 moves within the city for each unit constructed. `If you build for the market, very effective filtration takes place,’ he said.” - See: Private Sector Is Paralyzed In Housing Slump Here; Nonsubsidised Housing Still In Slump, by Alan S. Oser, February 15, 1970.)
Show Me the (Lack of) Money! (Note: The Albany Times Union story selected for its headline about state fiscal woes appeared just days after this Atlantic Yards Report story about how Bloomberg appointees had neglected their fiduciary duties as board members in raiding funds from the MTA for the developer of Atlantic Yards.)
Bloomberg’s self-financed commercial (that we originally started talking about) begins with a whiny complaint focusing on how New York City has run out of money and positing that it's not Bloomberg’s fault:
New York City: For decades we’ve sent billions more of our tax money to Albany than we got back. Now a state budget crisis is leading to hundreds of millions in budget cuts, cuts that threaten New York City teacher layoffs.
“Billions” . . “hundreds of millions”: It would be good to put such figures in perspective.
Bloomberg called the state budget an “outrage” when upon its announcement the city estimated that it got only about $200 million in benefits from the state budget of the $600 million the city requested. And, as highlighted in an ensuing City Hall press release, Bloomberg focused in on $300 million in revenue-sharing funds directed to the city that the new state budget was cut out.
The federal budget cutbacks in progress will also affect the city but, unlike the state budget cuts, the Bloomberg administration has gone low profile about criticizing them. Prior the April 8, 2011 compromise that averted the threatened shutdown of the federal government there were estimations that the city would be sorely affected by the federal cutbacks. (See: Republican Federal Budget Would Force Huge Spending Cuts On New York City, Gus Lubin, Jan. 25, 2011.) After the compromise there were brief announcements passed on via local radio that Bloomberg officials were studying the effect of the cuts on the city but subsequently there has been no New York City follow-up (although the projected negative effect on New Jersey cities across the river has been covered). Is Bloomberg’s low profile on this related to presidential ambitions?
Pending what more we might hear about this from the Bloomberg administration, here are the kinds of figures from proposed federal cutbacks that were of concern prior to the compromise: $150 million more cuts for the MTA, a $5 million cut for law enforcement, and a $9 million loss in pre-K Head Start funding.
All of these figures, the $300 million loss in state aid, the proposed $150 million + $5 million + $9 million cuts in federal aid are offered to put in perspective the $2-$3 billion being spent on a mega-monopoly like Atlantic Yards. Atlantic Yards is all being handed to one developer without bid. (See all the piles of cash in the Bloomberg commercial image above?)
It is true, the exact figures of what Atlantic Yards will cost haven’t been recently re-calculated (with shifting facts they ought to be) but the casualness with which the duty to calculate such figures has been ignored by the Bloomberg administration is part of the problem, together with the fact that the administration has never forthrightly and honestly presented these costs to the public. $2-$3 billion, my own calculation (that allows substantial room for error within the $1 billion range stated) is still accurate.
Not all of that $2-$3 billion will be spent in one year, as with other figures cited earlier which are annual budgetary amounts. It is also true that not all of the $2-$3 billion is city money (it is a co-funding mixture of city, state and federal money) or that it will all be spent during the three terms of the Bloomberg administration, but it is true that through his actions as mayor Bloomberg is seeking to commit the public to a totality of expenditures in that amount while he is in office.
The Core of the Problem With Bloomberg's Mega-Projects
These expenditures are a red flag advertisement to state and federal officials that the city doesn’t seriously need money, that when we have it we can afford to spend it frivolously even when we are advancing the most substantial portion of that for a basketball arena (the Ratner/Mikhail Prokhorov arena) which it has been calculated will result in a net loss to the public. That net-deficit-to-the-public arena was recently declared the “core of the project” in the state senate hearing testimony of Kenneth Adams, the man nominated to run ESDC, the state agency theoretically overseeing the project, thereby with Bloomberg’s aid, getting around the city reviews of and public participation that would otherwise have been required.
Merriam Webster provides these definitions for what Mr. Adams likely meant when he referred to the arena as the “core of the project” (I don’t think he was analogizing to the stripped-away inedible remainder of piece of fruit somebody might hand you):
• a central and often foundational part usually distinct from the enveloping part by a difference in nature • b : the essential meaning : gist • c : the inmost or most intimate part
The "most intimate part" sometimes means or implies the most `honest' or part or part most honestly representational of the whole.
• the central, innermost, or most essential part of anything.
If such a money-losing frivolity as the arena is “the core” of the significant large-scale expenditures Bloomberg is mobilizing, why then should the state and federal government send more money our way? And with money being spent so frivolously by Bloomberg, is it any wonder that the city, pursuing policies with the rhetoric of intending growth, has become too expensive for a growing population to reside here?
Bloomberg self-financed a 30 second advertisement to laud his accomplishments. Imagine what we might have had to talk about in this post if the ad we were considering had run a full minute.
Before expressing any Noticing New York reservations (there will be some) you should know that “Client 9: The Rise and Fall of Eliot Spitzer” is such a superlative film that it unquestionably raises the bar for the increasingly popular genre of political documentary. Its achievement is to navigate densely intricate subject matter with masterful adroitness.
The film is a product of the same book-and-movie collaborating team, Alex Gibney, film maker and Peter Elkind, book author, who produced a book and film each titled “Enron: The Smartest Guys in the Room.” “Eron” was a great documentary on a related subject (we didn’t read the book) but “Client 9" surpasses that previous film and you should see it.
Here’s Why
If political machinations fascinate you, you should see this film. If procedurals about using and abusing the law intrigue you, you should see it. If being witness to extreme brute force power games race your pulse, you should see it. But most of all, if you value your own personal economic and political freedoms you should see it because this film is very clear about the tenuous thread on which those freedoms hang.
Notwithstanding that the story is true and all its characters real, the film is like the best noir in that it is about people consistently behaving very badly, and we are not talking about the escorts, prostitutes and madams who are central to the plot. For the most part these bit players come off rather well. We are not even talking about Eliot Spitzer, the cornered John and disgraced, hypocritical politician.
Though the film proceeds like a detective story following what the New York Time review refers to as a persuasive “trail of bread crumbs” (we would say a “convincing” trail) it is no mystery if you have seen the film’s trailer that its real heavies are miffed Wall Street tycoons, accompanied by their lower echelon henchmen, hungry for revenge after Spitzer’s “Sheriff-of-Wall-Street” `Bingos!' identifying malfeasance they were up to. That the lower echelon henchmen include a G. W. Bush appointed United States attorney for the Southern District of New York (Michael Garcia) indicates how near the pinnacle of power we should consider the vengeful tycoons to be. Racing through its multitude of connections, the film reminds us of the contemporaneous Bush-Gonzales U.S. Attorney appointments scandal which involved orchestration by the U.S. Department of Justice and the White House to turn control over U.S. Attorney and their investigations to partisan political advantage.
(Trailer for "Client 9" above.)
The Lower Echelon Henchmen Working for the Messrs. Big
Other picturesquely entrancing lower echelon heavies provide exuberant and unabashed interviews that keep the film lively. The harlequinesque Republican operative Roger Stone is one of them. Joe Bruno, recently the head of the New York Senate and recently convicted on federal corruption charges for concealing conflicts of interest while receiving hundreds of thousands of dollars from a businessman wanting favors from the Legislature is another. Bruno was sentenced to two years in prison plus three years’ probation and to pay $280,000 in restitution. His conviction and sentence is in doubt because the U.S. Supreme Court has ruled that the federal “honest-services” law he was found to have violated (which makes it a crime “to deprive another of the intangible right of honest services”) is insufficiently specific to be constitutional. (The trial revealed that during his years as Senate leader, Mr. Bruno received more than $3.2 million as a consultant, with his public-employee staff handling much of the work for which he was being paid.)
Top Heavies
The two particularly identified Wall Street titans at whose doorstep Spitzer’s ouster from the governorship is laid are Maurice R. (Hank”) Greenberg, the former chairman of A.I.G., and Kenneth G. Langone, a former director of the New York Stock Exchange. Greenberg and U.S. Attorney Garcia were linked prior to Garcia’s pursuit of Spitzer: Garcia intervened to protect Greenberg from Spitzer’s prosecution by making a faux claim that he, Garcia, would prosecute Greenberg in the future. Greenberg’s A.I.G. is the firm that absorbed $182 billion (yes, “billion”) of the $700 billion bank bailout Congress authorized in 2008. While some of the banks that received bailout money are returning funds, A.I.G. is ultimately expected to succeed in returning only a fraction of what it received.*
(* A complicating wrinkle in straightening out the overall accounting in this is that, to its detriment, A.I.G. was, in the course of implementing the bailout, forced to be a conduit of funds to other financial institutions so that banks like Goldman and Barclays that returned funds to federal government did so with unearned profits, essentially free money, passed to them by A.I.G.. This, however, does not vitiate how great a role A.I.G.’s excessive risk taking had in precipitating and deepening the overall crisis.)
Rose Colored View, . . . Not
In trying to rehabilitate and distance himself from A.I.G.’s problems after the financial meltdown Greenberg appeared on Charlie Rose and attempted to blame Spitzer for A.I.G.’s collapse, asserting that problems at A.I.G. could have been prevented had he, Greenberg, not been forced out as head by the accounting scandal Spitzer’s prosecution brought to light,. The film contains a snippet of that March 2009 Charlie Rose interview which Noticing New York mentioned at the time. Watching the program back in 2009 Greenberg’s argument to disassociate himself from A.I.G. problems was intriguing and we don’t recall that Rose, being a soft interviewer, challenged him about the improbability of his proposition that A.I.G.’s 2008 $182 billion problem was attributable to events that intervened after Greenberg’s June 8, 2005 departure from the firm. From the film it appears to have been quite the contrary: Greenberg’s efforts to doctor the A.I.G. books* with unreal assets were more likely a warning sign that bad financial practices were catching up with the firm. The scheme involved AIG attempting to get a fictitious transfer of nominal balance sheet assets from Warren Buffett’s Berkshire Hathaway's General Re insurance unit. (For more on this see: AIG's meltdown has roots in Greenberg era, By Lilla Zuill - Analysis, Tue Mar 3, 2009 10:06am EST)
(* Previously, AIG was fined over $100 million for helping other companies cook their books.)
In discussing Greenberg’s maneuvers one of the voices of the people involved attributes as particularly apt to Greenberg the phrase: “All I ask for is an unfair advantage.”
LOL or For Crying Out Loud?
Given that Greenberg and Langone earn the really big bucks* when they play the Wall Street game it is at times howlingly funny in a black humorish way to hear some of their inept disavowals during the movie. Langone maintains that he just happened to know about Spitzer’s purchasing mail orders to pay for escorts because he just happened to have a friend who just happened to be in line behind Spitzer in the Post Office who just happened to look over the Governor’s shoulder and then just happened to guess that what he was seeing would be something Langone would be interested in and know how to interpret. It would be funny were it not for the massive resources these Goliaths can mobilize and misuse.
(* Earlier in the year he left A.I.G., Greenberg transferred A.I.G. stock worth $2.6 billion - yes, billion- to his wife in what one non-Spitzer lawsuit alleged to be a fraudulent transfer.)
“Client 9" is essentially on the same page respecting the legal investigation into Spitzer’s use of prostitutes as “Inside Job,” another recently released political documentary (still in theaters) that also avails itself of the use of Spitzer as one of its talking heads. Both films propose that Spitzer was suspiciously and unprecedentedly singled out and targeted by the prosecutor investigating the prostitution ring. “Inside Job” which looks at the entire arc of the financial crisis documents the pervasiveness of prostitution and drug use as an accepted part of Wall Street’s high-rolling cooperate culture extending to the very top of the industry and then interviews convicted madam Kristin Davis, who states unequivocally that the prosecutors who shut down her operation had absolutely no interest in leveraging her Wall Street client list into investigations of any Wall Street improprieties. That’s probably true but Ms. Davis is not be the most reliable bearer of such news.*
(* “Client 9" tells us that Ms. Davis, interested in publicity, used Roger Stone, the aforementioned Republican operative, as her campaign manager in a recent run as the Libertarian candidate for Governor- that’s at the same time Stone was assisting the Tea-party/Republican Paladino campaign. Stone was apparently attracted by the idea of using Ms. Davis to keep Spitzer’s downfall in the voters’ minds. Davis ran a competitor service to the Emperor’s Club escort service used by Spitzer and with Stone in the wings she has been saying that she too supplied dates for Spitzer. “Client 9" throws cold water on that assertion, reporting: “New York law enforcement says there’s no evidence of any link.” Still, Stone has managed to sow confusion: Ed Koch should know better but when he reviewed “Inside job”- primarily from the standpoint of endorsing its political positions- he misidentified Ms. Davis as “the madam who provided Spitzer . . . with prostitutes.”)
Countries Where the Law is Malleably Used by the “Siloviki”
The bottom line is that Spitzer, like Bill Clinton, was targeted for an abuse of the law. Like Clinton, they got Spitzer on his sex life. When you start with the man, not with noticeable misdeeds, and then figure out how the law can be shaped to get that man it is an abuse. Having gone to the movie just after reading an article about Putin’s trial of Mikhail Khodorkovsky we arrived in a frame of mind attentive to such abuses. (See: Talking Business, Unyielding, an Oligarch vs. Putin, by Joe Nocera, November 5, 2010.) The Joe Nocera Times article linked to describes the newest trial conjured up to keep Mr. Khodorkovsky, a former Russian oligarch, in jail (he has already spent seven years in jail) as as a purely “sham trial” where, as Mr. Khodorkovsky pointed out in his own statement, the “result is absolutely predictable” thus communicating to all watchers with “stark simplicity” the “obvious conclusion . . . that the siloviki [Russian slang in Mr. Putin’s circle of powerful bureaucrats] can do anything.”
Mr. Khodorkovsky, once worth $15 billion before he was stripped of his company that was then sold off to political insiders, was viewed as a threat to Mr. Putin because he was willing to back political parties opposed to Mr. Putin. The way Mr. Nocera articulates it, Khodorkovsky was therefore convicted of “Kafkaesque” “trumped-up tax charges brought by prosecutors acting on behalf of Vladimir V. Putin” with “what appears to be the complicity of PricewaterhouseCoopers” who bowed to improper pressure from Russian authorities. As such Mr. Nocera asserts:
He has become in the Putin era what Andrei Sakharov once was, a courageous dissident standing up to an authoritarian regime, a living, breathing rebuke to the absence of the rule of law.
Respecting this absence of the rule of law Mr. Khodorkovsky asks in his own court statements whether Russia will be a country “where the law is above the bureaucrat.”
How `Becoming ' is The Legal System’s Malleability to U.S.?
Probably the law in the United Sates isn’t yet so malleable as to be on a true par with the abuses in Russia but the targeting of Spitzer with all the power of the U.S. Attorney’s office is definitely on this slippery slope and anyone who wonders just how dangerously malleable the law has become so as to give our own homegrown “siloviki” unfair advantages need look no further than Atlantic Yards and Columbia University’s seizure of swaths of land by eminent domain abuse. Both those seizures are predicated upon a pretextual use of the legal concept of blight even when Charles Schumer, the U.S. Senator living very near to Atlantic Yards, says he knows there was no blight in the area. Schumer nevertheless tolerates these abuses that are bringing the Ratner mega-monopoly into existence. Watchers of Atlantic Yards progress are likely to have reached the obvious conclusion that ESDC, the bureaucratic sponsoring agency and the NYC-siloviki therefore “do anything.”
But more about Atlantic Yards later; that will be important to the way we intend to wrap up our observations.
Spectacularly-Resourced Investigations Into Hypocrisy
It is not that our Noticing New York perspective is that Eliot Spitzer didn’t do wrong or even that he shouldn’t have been removed from office because of his actions. His hypocrisy was pertinent to his public office holding and his misconduct no mere personal peccadillo deserving of privacy. That is true even if you support the legalization of prostitution. I hate to have to agree with Roger Stone but he puts it correctly when he says in the film: “Don’t bust people who are running call girl rings if you yourself are gonna patronize one.” (The argument that the escort rings were legally selling high-priced companionship rather than illegally selling sex comes across as speciously stretched.) Stone’s being right, however, doesn’t change the frightful inversion of democracy that results if the only way that our public leaders can remain in public office is when power brokers, by their grace, refrain from making adversarial politicians the subject of spectactularly-resourced personalized investigations.
Living by a Two-Edged Sword
There is plenty of complexity of blame for the film to locate in its anatomy. Sorting through some he-said/she-said juxtapositions in the film concerning Spitzer’s famous temper most viewers are likely to come away with the impression that there probably were occasions where Spitzer threatened others with the same kind of personalized vendetta by which his own use of the law and the power of the Attorney General’s office against them would be a concern, for the same very same reasons that the way they later came after him is a problem. Spitzer would apparently refer to being “at war” with those who challenged him. In this there was some `live by the sword, die by the sword’ justice in what happened to Spitzer.
The Emphasis of More Problems That Trooped In
The perception that Spitzer would go so far as to unethically cross boundaries was reinforced by the scandal ultimately refereed to as “Troopergate” where Spitzer made information public about State Senate leader Joe Bruno’s travels, including unflattering information about Bruno’s use of the state's air fleet. The film doesn’t spend much time sorting out the details of this story and is perhaps too kind to Spitzer in its summary. It was no doubt improper for Spitzer to focus on releasing information about Bruno the way he did (including use of the state police force to gather information) notwithstanding the valid public interest in having such information see the light of day (an interest in knowing about all politicians, not just selectively about Bruno). Spitzer made everything he did far worse by the surreptitious way he went about it together with his after-the-fact, ill-fated attempts at denial.
One strange caveat: As the film recounts, Spitzer’s spying?/collection-of-information-about? Bruno’s travels showed that Bruno was meeting with Hank Greenberg. That was almost certainly to plot Spitzer’s downfall. I am sure that some end-justifies-the-means theorists would therefore rationalize what Spitzer did in the name of self-defense.
Critically Needed: Action Not Just Criticism of Wall Street
"Client 9" makes extraordinarily clear that Spitzer in his investigations of Wall Street was performing an absolutely critical function that needs to be championed and needs to continue. You may never want to do business with Bank of America again after you hear the film’s explanation of how, in collusion with Eddie Stern’s hedge fund Canary Capital Partners LLC, the bank used a computer hooked up in its basement to siphon off from the mutual fund market profits belonging to the rest of us. The scheme involved using an illegal manipulation known as “late trading,” trading mutual funds after closing prices were officially closed. And everyone probably remembers Merrill Lynch’s false and misleading stock recommendations.
Proudly Attracted to Defining It Dramatically as “Hubris”
Spitzer is drawn to seeing his fall in the Greek tragedy terms of “hubris.” He has a quote in the film particularly on this point: “You know, it’s like hubris. It’s like those whom the gods would destroy they make all powerful.” (The Greeks also said those whom the Gods would destroy they first make proud and in Euripides’ Medea "Whom the gods would destroy, they first make mad.") Spitzer sees himself as akin to Icarus of Greek mythology who, with his wings made of feathers and wax, fell into the sea when he flew so high that the sun melted the wax.
Icarus: Flying Too High and Flying Too Low- Spitzer’s Successors
People sometimes don’t remember the complete instructions Daedalus, his father, gave Icarus about using the wings he had fashioned for them both to escape from the island of Crete. Daedalus cautioned him not only not to fly too high near the sun but also not to fly too low, lest the sea mists and waves sodden his wings and end his flight that way. Spitzer’s successor in the Attorney General’s office was Andrew Cuomo. Shortly before this month’s election that will promote Mr. Cuomo so that he will also succeed Mr. Spitzer as Governor, the Times ran a story reporting that while Mr. Cuomo as Attorney General was as interested as Spitzer in headlines he was not attentive to the follow through that would take a financial bite out of the misbehaving and compensate those hurt:
. . . the praise is neither universal nor complete, and there are many who assert that Mr. Cuomo has, not unlike his predecessor, been more interested in headlines than in undertaking the tedious chores needed to bring lasting reform, and that he has mishandled, sidestepped or prolonged some public integrity cases.
So for instance, when Mr. Cuomo’s AG office got credit for catching “more than a dozen large health insurers . . . routinely using flawed data to shortchange consumers for reimbursements on out-of-network medical costs” the insurance companies two years later were “still using the flawed data to set payments to consumers” with “almost none of the money won in the settlements” going “to those who had been undercompensated.” Accounting for this perpetuation of the same-old is that a “new system is under construction” being overseen by a “handpicked official who had worked for Mr. Cuomo’s father when he was governor” being paid “$183,000 for what amounts to part-time work.”
The article also notes that “an investigation into whether the administration of Mayor Michael R. Bloomberg [who endorsed Cuomo] and some public officials violated lobbying laws in their redevelopment efforts is still unresolved after two years.” Cuomo also did not investigate Atlantic Yards when asked. Instead he accepted and did not return campaign contributions from its developer. A spokesman for Cuomo during the campaign explained that Cuomo’s ability to retain those contributions was all based on the timing of their acceptance.
So if people are asking the question of whether Spitzer flew too high it should probably alternatively be asked whether Cuomo flew too low. If we are lucky, Cuomo’s successor won’t. Cuomo is to be succeeded as Attorney General by Eric Schneiderman who, during his campaign for the AG’s office, offered to investigate projects like Atlantic Yards and eminent domain abuse.
And, as will be discussed shortly, although the film prompts people to ask whether Spitzer flew too high they should probably also be asking whether in his erratic flight Spitzer also flew too low.
Here is another conundrum: Is it that Spitzer soared too high or is it that things on Wall Street are so abysmal he seemed to soar high only by comparison?
Mythological Dichotomy?
With the film trafficking in the grandeur of Greek god mythology archetypes to define what happened when Spitzer fell to earth it would be tempting to construct out of the Spitzer chronicles, a “hyperion to a satyr” dichotomy if I may borrow Hamlet’s comparison of these extremes:
So excellent a king; that was, to this, Hyperion to a satyr; so loving to my mother That he might not beteem the winds of heaven
(Hamlet is comparing his deceased father to the sun god Hyperion and his usurping uncle Claudius to a satyr in Act I, Scene II.)
In other words it would be easy to see the film as dividing Spitzer into two distinct halves, the hyperion-cusader-for-principle and the sex-obsessed satyr. Indeed the film offers some thoughts specifically along these lines when early on it dreamily posits that while we want our public leaders to be gods, humans might philosophically be only hybrids: half angel and half animal. A plea made near the end of the film, though not necessarily adopted by it, that suggests that Spitzer should be charitably viewed as merely human.
The same Act I, Scene II of Hamlet quoted above, similarly dances later with the concept of viewing men as no more than human when Hamlet responds to Horatio’s comment that Hamlet’s father was “a goodly king” by saying “He was a man, take him for all in all. .” Hamlet then proceeds immediately, in his typical moody contradictory fashion, to grandeurize his father saying. . . “I shall not look upon his like again.”
A Political Piece of Work: Spitzer’s Third Side
View Spitzer charitably as only human? Half angel and half animal? This is where I think the movie falls short. It would be less apt to say that `Spitzer was just a man, taken for all in all’ than to say, `taken for all in all Spitzer was just a politician.’ And, as a flawed politician, we shall almost certainly look upon his like again . . . with tiresome repetitiveness, I fear. Let’s look at it this way: Though it may complicate the narrative, Spitzer had not two sides but three. Spitzer not only had his angelically principled side and a second side of animal temper and appetites: He had a third side which was that of the disappointing business-as-usual politician. To appreciate this you will need to know more than the film tells you. It touches upon what Noticing New York cares a lot about, the real estate industry in New York.
Disclosure: Working For Spitzer (Or Not)
Here is a note of personal disclosure that will lead into our Noticing New York reservations about the film: Spitzer was the last of four governors I worked for at the state housing finance agencies, those in order being Carey, Cuomo (the father), Pataki and Spitzer. Though I worked briefly for the Spitzer administration, the Spitzer administration when it arrived was not interested in continuing my services on behalf of the agencies and, taking that as a given, I did not wish to counter by raising the technicality that, legally speaking, my state service ought properly to have continued. Regular Noticing New York readers familiar with our predilections when it comes to proper process and the public purpose might infer that my departure from the government scene might have had something to do with those predilections. Though that might be a reasonable suspicion, it would be subject to far too many unprovables. One day perhaps, I’ll find out what was on the administration mind.
Twelve Years Difference
Substituting for any inferences I might make about my own departure I can observe some other things. Immediately upon coming in the Spitzer administration decided it wanted to do without the services of the individual I told them was most valuable to the agencies. This was an individual push-the-envelope investment bankers had long lobbied to get rid of. Twelve years before there had been some very deft maneuvering on the part of the nascent Pataki administration to retain this individual during the dangerously political lust-for-blood change-of- administration times that ensue right after an election. Initially, there was an interim “transition” retention of this individual, then a position and title change that kept him out of sight and out of mind and then eventually, as was appropriate, he resumed his climb eventually reaching new pinnacles of position at the agencies. Twelve years later the Spitzer administration took the helm and the bankers got their scalp.
Scrambling When the Crisis Came
I doubt that the Spitzer administration saw the financial meltdown coming when they assumed office in 2007. I credit the caution, skepticism, careful review, and stubborn negotiating of this gentleman to whom I am referring as being much of the reason that when the crisis struck the agencies' transactions fared pretty well. I’d like to think I made my own like-minded contributions to forestalling the kinds of problems that might have occurred. I understand that after the crisis struck the administration scrambled to reinvent the wheel and put back in place the style of safe guards that were second nature to this dismissed gentleman and perhaps myself. In between? I think there is evidence the agencies would have done better had he been kept around.
Spitzer as Reformer?
I also noticed that while the Spitzer administration ran on a platform of reform (along with the Alan Hevesi who never took office and was ultimately indicted) the administration seemed to think more in terms of reform applying to others than to itself. It might be appropriate to take as a just-for-instance, the subject of executive compensation, since that is an important subject in the “Client 9" film. In the film the question is whether or not Mr. Langone as a head of a not-for-profit restricted by New York State’s not-for-profit law’s provisions respecting reasonableness of compensation could properly be considered to have earned $139 million (yes, “million”) the year he left his position as head of the new York Stock Exchange. No laws were broken but I found that the idea of a natural, second-nature transparency on this issue was something the Spitzer administration couldn't accepted without breaking stride.
Spitzer and Atlantic Yards
The worst indicators I saw about whether process and the public were properly valued were in regard to Atlantic Yards. Although I saw an indication that the Spitzer administration was going to jump Atlantic Yards to the head of the line giving it an unearned priority over other projects, which would itself have been a bad thing, the most egregious conduct I saw from the Spitzer administration respecting Atlantic Yards I saw from outside government. I have previously written about how the Spitzer administration ignored critical comment it was receiving about the Forest City Ratner mega-monopoly (including comments relating to state agency reform) and how, beyond that, it was deceptively burying negative comment it was receiving within the bowels of the executive office. (See: Thursday, February 26, 2009, Dear Eliot, . . . other things kept undercover may bear investigation.) That was consistent with what we heard about Spitzer’s reaction when he was approached about the megadevelopment by community advocates who came with New York City Council woman Tish James to meet with him in May of 2005. Back then everyone knew he was on the way to gubernatorial office.
Spitzer met the group bringing an entourage in tow. Reportedly losing his legendary temper Spitzer yelled, apparently willing to use his anger to make his visitors feel wrong for even darkening his doorstep with the issues presented to him. He said he didn’t care about process and he didn’t care about the community. (What I believe is a belated, somewhat inaccurate 2006 reporting of that meeting can be found in the Daily News.)
Why was Spitzer drawing the line and not dealing with the extreme improprieties concerning this major real estate project? Was it because he came from a real estate family himself? (Family real estate money financed the political campaigns that put Spitzer into office. Family real estate money also paid for Spitzer’s phenomenally expensive trysts with escorts that would otherwise have been totally out of the reach on a public official's salary.) Was Spitzer, as a politician, simply picking his fights and retaining allies?
The Goldman Rule: Lines That Shouldn’t Be Drawn
One explanation won’t hold up: You can’t easily differentiate the misconduct on Wall Street from the misconduct in the real estate industry. And, when it comes to real estate finance and the issuance of bonds, a lot of the players are the same: The Goldman and Barclays of the nation’s financial crisis are also involved with Atlantic Yards. Goldman Sachs is also swings over to the ownership/development side: It owns a huge new building in Battery Park City for which it was unfortunately allowed to override the Battery Park City master plan while receiving special subsidy deals and a zoning change to build bigger.
The subsidized, regulated, special-exception world of New York City real estate (and to an only somewhat lesser extent New York State real estate) is unforgivably complex in all its myriad nooks and crannies and, like Wall Street, it is increasingly a world where the power players take advantage of the average Joe and the mom-and-pop operations that represent the economy and livelihoods for the rest of us. Just as there are those who recommend that small players not turn their investment money over to Wall Street investment advisers because it is a rigged game, there are those who give similar advice about not investing in the city’s real estate.
There is a small club of big operators. Tools like eminent domain are discriminatorily wielded to benefit that small group who regularly dine with the Mayor and attend the same “charity” functions but will never be wielded against those in the big boys club. So, for instance, eminent domain is wielded to give Bruce Ratner (together with his Russian oligarch partner Mikhail Prokhorov) a 30-acre mega-monopoly over most of Brooklyn’s major subway lines, but eminent domain can’t be used in Manhattan against the powerful Dolan family to relocate Madison Square Garden to a new facility and give the citizens of New York a new and suitable Penn Station (the long-planned Moynihan Station).* What’s worse is that these government interventions to redistribute wealth from the rest of us to this small club of already supremely wealthy powerful insiders is poor resource allocation. Like so many other artificial interventions to transfer more wealth to the wealthy in our economy, it’s a drag on our economy that holds us back.
(* The spectacular gift that was the old Penn Station was destroyed and replaced by the current rabbit warren to effect real estate deals the industry wanted. The replacement station is pitifully decorated with pictures of the one that was destroyed- see picture.- Click to enlarge. Amazing what the real estate industry will do to the rest of us for the sake of one of their "deals"!)
Did I mention the regulation? The biggest players like Forest City Ratner, Columbia University (or Goldman) have nothing to fear from it. The financial crisis befell us partly because of a neutralized SEC (Securities and Exchange Commission). In both the financial industry and the real estate industry “agency capture,” industry takeover of the regulatory agencies is a problem that simply tilts the playing field more in their favor. (See this definition and discussion.)
Putting the Question of Eloquence Front and Center
As the film notes, we have been seeing a lot more of Spitzer again recently. Spitzer’s reemergence into public life after his fall from grace was predicated almost entirely upon his having something to contribute to the public dialogue. First, there was his Slate Column (does that mean he is competing with the rest of the world of bloggers including Noticing New York?) and then he began appearing regularly as a talking head on the televised media. Now he has a regular program on CNN. Is he up to the job?
We have always wondered about Spitzer’s eloquence. He surely has his well-scripted moments. I saw his campaign speech in its entirety three times. It was a good one, all about attorney general activism. He spoke about how, if the federal government wasn’t going to regulate Wall Street, he as Attorney General of New York was going to use a state’s rights rationale to step into the vacuum.* Hearing the speech three times I was able to notice what others probably couldn’t: Each time the speech was word-for-word, virtually the same. I voted for Spitzer but I was worried about this rigidity and limited range. It should be noted that Spitzer, like Cuomo in the last election, was never tested in the crucible of the campaign because it was a foreordained conclusion that he was going to win. We seem to have had a lot of elections like that in New York recently.
(* Ironic that this film is now partly about the vacuum Spitzer leaves behind him.)
Here is an observation about eloquence: It is often assisted by clear thinking and it is often impeded by an avoidance of obvious connections and analogies. By and large I wasn’t especially impressed by Spitzer’s appearances as a talking head or his grasp of the overall economic picture about which he ventured to talk, for instance, when in September of 2009 he appeared on Real Time with Bill Maher alongside Paul Krugman, a Nobel Prize-winning economist and writer who truly can be incisive and eloquent about the economy. It was Krugman who provided us with his brilliant column, The Madoff Economy, (December 19, 2008). The column showed how easy it was to make connections and analogize what has been going on with the economy as a whole with Bernard Madoff’s Ponzi scheme (including a misplaced idolization of men walking away with a lot of money and assumptions that they know what they are doing):
. . . surely I’m not the only person to ask the obvious question: How different, really, is Mr. Madoff’s tale from the story of the investment industry as a whole?
* * * *
. . . surely those financial superstars must have been earning their millions, right? No, not necessarily. The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.
Spitzer may have brought most of his Wall Street prosecutions under the Martin Act, the same act used to prosecute Ponzi schemes, but his own eloquence didn’t take flight, making the obvious connections.
The film does contain a Spitzer interview snippet that shows off the kind of talking head stuff that Spitzer was dishing up on the networks as he spoke about reining in Wall Street to address the problems of the economy as whole. While it is not bad, it is about the best we have heard from him:
The issue of CEO comp was something I was trying to get people to take a look at, It was off the rails.
* * * *
The ratio of CEO comp to average worker’s comp had gone from about 40 to 1 to about 550 to 1. CEOs began to just take everything they could. And ultimately that was going to destroy our economy because instead of running the companies to create long term wealth and long term investment, all the games we’ve seen, everything from backdating stock options to maximizing short term profits without sufficient investment for the long term, these are things which are cancers inside the economy.
It is not that the above isn’t true, but it is fragmentary and rather vague when there is so much more needing to be pointed out and said by those put on the airwaves as insightful spokespersons.
Outing Comes To Ouster: A Well Run Dry
Darren Dopp, who resigned as Spitzer’s director of communications over his own role in the Troopergate scandal, suggests that a primary reason Spitzer’s outing lead to ouster was that the “reservoir of good will was empty” drained by Spitzer’s “combative style.” That is probably largely true, especially if the phrase “combative style” incorporates Spitzer’s near vendetta-based crossing of ethical lines in pursuing his adversaries together with his hypocritical holier-than-thou superiority. Still, Spitzer might have had access to a deeper “reservoir of good will” if he had also not been hypocritical about the basic principles for which he was elected. Noticing New York would have been much more reluctant to see him hurried out of office had he been doing and saying the right things with respect to Atlantic Yards. He wasn’t and David Paterson, the Lieutenant Governor, was standing promisingly in the wings with a history of opposing eminent domain abuse. (David Paterson is obviously another politician whose hypocrisy helped usher him quickly out of office.)
Superman Returns?
Go see “Client 9." Just to leave you curious: Do you think you know who Ashley Dupre is? Maybe you don’t. Check out the film. And do you think you know the story about the “black socks”? Even if you think you do you might want to check out the film.
Here is one thing we won’t leave you curious about. Interviewed outside of the context of the film, Alex Gibney, the film's maker, has answered one question that a lot of people will probably leave the theater wondering: Gibney thinks Eliot Spitzer wants to get back into politics.
Eliot Spitzer back in politics? If that’s ever going to happen it is going to take more than Spitzer’s foreswearing call girls and mastering his splenetic rages. Having once promised us a set of Hyperion principles worthy of a sun god, it’s going to take Spitzer’s true adoption of a set of principles that apply honestly across the board. If Spitzer ever adopts such a set of principles perhaps he can then find a voice, the eloquence he has not yet mastered, the eloquence that is there to be claimed by those willing to tell the whole story, including how the New York real estate industry is like Wall Street. Sequestering the satyr won’t be enough. He’ll also need to banish that third side, his less talked about politics-as-usual blind-to-real-estate-industry-abuses side.
NOTICING NEW YORK & NATIONAL NOTICE are both independent entities managed by Michael D. D. White of Hop-Skip Enterprises. Michael D. D. White is an attorney, urban planner and former government public finance and development official. *** Noticing New York covers New York development and associated politics. National Notice covers national policy and economic issues *** Contact: MichaelDDWhite(at)gmail.com
(Photo above from this link.)
Eliminate the Fed? GULP! That would be a big step. It’s really hard to get one’s mind around what it would mean in terms of the economy. And the belief of some that eliminating the Fed would be good because it would be better to regulate the money supply by a return to the gold standard is scary: How much gold you have isn’t a measure of true societal wealth. Among other things you can’t eat it.
We understand concerns that the Fed has a lot of power, that while it functions as if it is one of the most powerful organs of government it is not readily accountable as other branches of government are supposed to be, that it is in technical terms essentially a private entity.
(Above Federal Reserve Directors Kathy Wylde and Lee Bollinger both of whom are key backers of neighborhood-seizing eminent domain abuse to benefit government assisted monopolies.)
