Michael Bloomberg went down to Washington last week to have his say in the great battle now raging over whether new regulations should be imposed on the titans of finance.
On one side are the Obama White House and most other Democrats, who say safeguards are needed to avoid another financial meltdown. On the other are Republicans, big banks, and investment firms who insist that things are fine just the way they are.
The mayor had no trouble picking sides. He went to Congress to cheer on his notion of the home team: Wall Street. His battle cry is that Wall Street is to New York what oil is to Texas. We must do everything we can to protect it from those who would curb the creative juices of our local financial geniuses, he insists.
After meeting with Senate leaders, he paused to speak to the press: “I think the bashing of Wall Street is something that should worry everybody,” he said.
This would be great hometown cheerleading except that he is rooting against those of us still digging out from the last time Wall Street exercised its creative genius without adult oversight. In a feverish hunt for new earnings, bankers devised fascinating financial tools like credit default swaps and debt derivatives. These drew trillions of dollars in profitable investment. Of course, when it turned out that these sophisticated instruments depended on the ability of single mothers in Southeast Queens to keep up mortgage payments equal to their entire monthly take-home pay, everything collapsed.
A different mayor might well have had a different spin on where to line up in this fight. A quick survey would establish that, thanks to the Wall Street brainiacs Bloomberg wants to protect, New Yorkers face a bleak terrain.
We face cuts in classrooms, teachers, firehouses, day care centers, and hospitals. Our transit system, the backbone of the economy, is looking at a world of pain, including the elimination of bus and subway lines, shuttered token booths, and an end to free student passes. Oh, yes, we may see another fare hike. It would be the third in three years.
When the MTA board voted last month for its latest cuts, the mayor’s people all voted in favor. Asked about this, the mayor responded: “Just say thank you that it isn’t any worse.”
Bloomberg insists that his Wall Street boosterism is in our best interest. He wants to protect the jobs of financial workers, and the thousands of civil servants whose paychecks depend on Wall Street’s tax-generating muscle. This is a debate worth having. But as with so many things involving Bloomberg’s City Hall, it is hard to figure out whether he has chosen sides based on our interests or his own.
For instance, when you consult the list of the 100 largest customers of the mayor’s financial communications giant, Bloomberg LP, you quickly see the names of those fighting hardest against new regulations. The mayor agreed to disclose these clients to the city’s Conflicts of Interest Board when he was elected in 2001. The reasoning was that making the customers public would help eliminate potential conflicts since the billionaire clients of the billionaire mayor stride the city like so many woolly mammoths.
The mayor’s first list was provided in 2002. It was updated in 2008. Run your finger down the Bloomberg 100 and you find all the leading warriors against Obama’s reforms.
The big players in the regulations battle, reports Bloomberg’s hometown newspaper, The Wall Street Journal, are Citigroup, Goldman Sachs, JPMorgan Chase, and Bank of America. All were knee-deep in the financial schemes that sent the economy off-track. All are found on both lists of top Bloomberg LP clients. Alongside their names are most of the other financial powerhouses whose noses are out of joint at the idea of new oversight.
It is Bloomberg’s claim that his company’s client base is so broad that a few customers, even these megawatt outfits, have no major influence on him. Maybe so.
What we do know is that these are the firms whose business has helped make him New York’s richest citizen. We also know that in this important fight, he is unabashedly waving their banner and insisting theirs are the true hometown colors.
James Parrott, whose Fiscal Policy Institute analyzes financial data for unions and others on the receiving end of Wall Street hijinks, said the mayor’s logic escaped him. He posed a couple of questions: “So if there were New York oil companies polluting the hell out of the environment, we’ve got to support them because it’s a hometown industry?” he asked. “Wall Street drove the world’s economy off a cliff, and if they want to do that again, we should let them?”
The best thing for everyone, Parrott said, “is a sustained economic recovery in which prosperity can be broadly shared by all New Yorkers. I don’t see how we can get that unless we get effective re-regulation, that puts limits on derivatives, puts limits on leverage, and forces a separation between investment banks and commercial banking.”
Jonathan Bowles, director of the Center for an Urban Future which regularly takes the city’s economic pulse, had a similar take: “Wall Street got us into this mess,” he said. “It’s going to happen again unless we establish some smart financial regulations that take into account the lessons learned from the past.”
Bowles works out of an office on lower Wall Street where he gets to see the financial laboring classes in action. “It’s true that Wall Street is the golden goose for New York,” he said. “That doesn’t mean that it shouldn’t be regulated, and that there isn’t a larger interest for the city in making sure this doesn’t happen again.”
On Friday, as Bloomberg was drumming up local support for his financial friends, the nation got another good look at their past handiwork. This came from securities regulators who filed civil fraud charges against Goldman Sachs. The allegation is that the firm sold mortgage-backed securities purposely designed to fail so that Goldman and a few favored clients could score a fortune. Goldman vigorously denies any wrongdoing. But what’s truly enlightening are the exuberant e-mails sent by the Wall Street whiz kid who allegedly orchestrated the scheme: “More and more leverage in the system,” typed this Goldman vice president in a giddy message to a pal. “The whole building is about to collapse anytime now . . . !!!”
Not that such talk disturbs the richest New Yorker. He holds fast to his faith in the markets, no matter any occasional excesses. A day before the Goldman Sachs scandal broke, the mayor defended another of his lofty notions. At the city’s invitation, a British artist has posted lifesize nude statues on the ledges of tall buildings around Manhattan. Alarmed passers-by keep calling the police, thinking they have spotted a likely suicide. One of the statues was placed on a high floor of the Empire State Building, where a 21-year-old Yale student jumped to his death just three weeks ago. “Why not put statues on the corners, holding guns at night?” a frustrated cop, speaking anonymously for fear of antagonizing a mayor who thinks this is grand theater, told the Post. “That would be fun artwork, wouldn’t it?”
The mayor was asked if the statues should come down. “No,” he said. “It’s a great exhibition. It’s one of those things that gets publicity around the world, brings tourists to New York.”
Just like Wall Street, which has spawned its own real jumpers every now and again.