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Break the banks or go bust

Like many of you, I've read a lot about the ongoing financial meltdown in the hopes of gaining an understanding of what is a decidedly complicated situation. This month's issue of Atlantic has one of the best pieces I've come across, in part because it describes what it is we need to do to get us out of this mess.

Ultimately, it's not about derivatives or bonuses or regulations. It's about politics, says the author, Simon Johnson.

The lead-in to the story summarizes matters quite nicely:

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government - a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we're running out of time.

This is not a short story - the printout runs 11 pages - but it is worth the investment of time.

Wrote Johnson:

Almost always, countries in crisis need to learn to live within their means after a period of excess—exports must be increased, and imports cut—and the goal is to do this without the most horrible of recessions. Naturally, the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.

No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.

Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks.

Johnson offers some eye-opening statistics:

  • Until the mid-80s, the financial sector never accounted for more than 16 percent of domestic corporate profits. By this decade, they had soared to 41 percent.

  • Average compensation in the financial sector ranged from 99 to 108 percent of the private sector in the '50s, '60s and '70s. It took off in the '80s and by 2007 hit 181 percent.

  • Wall Street paid out $18 billion in bonuses last year, amounting to 13.5 cents for every dollar of federal assistance, not that it was quid pro quo.

Johnson argues that Obama and company have got to play real hardball and break the political power of the bankers and others who have gotten us into this mess. And the public outrage notwithstanding, he said the bankers have gained, not lost power since the crisis began.

Johnson maintains that, absent a disarming of big finance, the nation is in for a continuation of shell games, band-aid solutions and worsening economic conditions. Hence, the need for change.

The power of the oligarchy—is just as important as the immediate crisis of lending. And the advice from the IMF on this front would again be simple: break the oligarchy.

An interesting, understandable and compelling read.

NY Times sees potential in Buffalo

The New York Times longs for a "bold urban vision" to help revitalize the nation's cities and sees particular potential in Buffalo.

Writes Times architecture critic Nicolai Ouroussoff:

The country has fallen on hard times, but those of us who love cities know we have been living in the dark ages for a while now. We know that turning things around will take more than just pouring money into shovel-ready projects, regardless of how they might boost the economy. Windmills won’t do it either. We long for a bold urban vision.

With their crowded neighborhoods and web of public services, cities are not only invaluable cultural incubators; they are also vastly more efficient than suburbs. But for years they have been neglected, and in many cases forcibly harmed, by policies that favored sprawl over density and conformity over difference.

Such policies have caused many of our urban centers to devolve into generic theme parks and others, like Detroit, to decay into ghost towns. They have also sparked the rise of ecologically unsustainable gated communities and reinforced economic disparities by building walls between racial, ethnic and class groups.

Correcting this imbalance will require a radical adjustment in how we think of cities and government’s role in them. At times it will mean destruction rather than repair. And it demands listening to people who have spent the last decade imagining and in many cases planning for more sustainable, livable and socially just cities.

The story goes on to deal with four locales, New Orleans, Los Angeles, the Bronx and Buffalo:

Perhaps the most intriguing test case for reimagining our failing cities is in Buffalo, where the federal government is pressing ahead with a plan to expand its border crossing facilities. The city was once a center of architectural experimentation, with landmarks by virtually every great American architect of the late 19th and early 20th century. Frederick Law Olmsted Sr., the father of American landscaping, created a string of elegant public parks intended for the city’s factory workers.

Like other Rust Belt cities, Buffalo began its decline more than a half-century ago, a victim of failing industries and suburban flight. Large sections of Olmsted’s parks and boulevards were demolished; an elevated expressway sliced through one of these parks, cutting it off from the riverfront; many of downtown’s once-proud buildings were left abandoned.

Yet rather than reverse that trend, the government now seems determined to accelerate it. The Homeland Security Department is planning to expand an area at the entry to the Peace Bridge to make room for new inspection facilities and parking. That plan would require the demolition of five and a half blocks in a diverse working-class neighborhood with a rich architectural history, from late-19th-century Italianate mansions to modest two-family homes built in the 1920s.

Local preservationists argue that protecting the city’s historic neighborhoods is fundamental to the city’s survival. Pointing out that bridge traffic is steadily shrinking, they are pressing the government to upgrade the train system and dismantle parts of the elevated freeway to allow better access to the riverfront. Not only would they like to see Olmsted’s late-19th-century vision restored; they would also like to see it joined to a more comprehensive vision for the city’s future.

At this point there is no concrete plan to counter the government’s, but the potential is great. The city’s architectural fabric is rich. It has an active grass-roots preservation movement. And few sites better sum up the challenges of trying to save a shrinking city. I for one would love to see what a talented architect could accomplish if his imagination were given free rein over such a promising site.

The entire story is worth reading, so have at it.

Also worth a look is this story from AlterNet dealing with the next wave of slums -- in outer-ring suburbs.

Suburbia's least desirable neighborhoods -- aging, middle-class tract-home developments far from city centers and mass transit lines -- are America's emerging slums, characterized by poverty, crime and other social ills. 

I don't see that happening here, not yet, anyway. Then again, I have never gotten the appeal of, say, Lancaster. Doesn't seem to be any there, there.

 


Buffalo still squandering anti-poverty funds

I'm getting tired of writing this story.

Once again, the federal government has come down hard on City Hall for mismanaging the $20 million-plus it gets annually to fight poverty and blight through the Community Development Block Grant program. 

HUD's been squawking, and the city squandering, since Jimmy Griffin was running the show.

As I reported in Saturday's News:

Among the problems: too much spending on bureaucrats, questionable financing for upscale
housing developments and sloppy fiscal management.

Or, as I reported back in 2003:

City Hall frittered away much of the money through parochial politics and bureaucratic ineptitude, The News found.

More than half went to "soft costs" that include covering bad loans, paying City Hall salaries and subsidizing an overblown network of neighborhood agencies, The News found.

Relatively little has gone to brick-and-mortar projects. What has been spent to revitalize downtown and neighborhoods, The News found, has been haphazard, with money sometimes going to risky and futile projects.

 

To give credit where credit is due, Geoff Kelly at Artvoice broke the latest story. Artvoice has also posted a copy of the HUD report.

Local HUD chief Steve Banko is pretty outspoken in the story:

“Normally you go into a city and there’s a clear line of communication and responsibility. I defy anyone to understand what happens in Buffalo’s City Hall."

 

You'd think that because Buffalo ranks as the nation's third-poorest city, Mayor Byron Brown would be hellbent on making sure sure he's making the most of his anti-poverty tools.

But, in addition to what the feds portray as his mismanagement of the block grant program, Brown has been an outspoken critic of a proposal by Gov. David Paterson to revamp the Empire Zone program. The zones were intended to promote investment and employment in distressed neighborhoods, but the program has been hijacked by downtown business interests.


To be fair, Brown inherited the problems of both the block grant and Empire Zone programs from Tony Masiello. But, three years into his term, Brown has not reformed them, despite the documented need.

In addition, the mayor has not yet delivered on his promised anti-poverty plan, which was supposed to be Job 1 of Deputy Mayor Donna Brown. She's held the job for a year, and all we've gotten so far is talk of a plan.

 

I think Jim Morrison sang about our economy

So, it seems, we're right back to where we started in the dark days of 1984.

You remember. We were reeling from the closing of Bethlehen Steel, etc. Unemployment was bad. Times were beyond tough, they were desperate.

Well, as David Robinson reports today, it's deja vu all over again.

The Buffalo Niagara region’s unemployment rate shot up to a 25-year-high of 9.6 percent during February, as nearly 11,000 local jobs vanished over the last year, the state Labor Department said Thursday.

“Across the board, we have a lot of weakness,” said John Slenker, the labor department’s regional economist in Buffalo.

The job losses were widespread throughout all portions of the local economy, with particularly steep declines at local factories, where more than 5 percent of the region’s manufacturing jobs have disappeared over the last year. But service-providing jobs also took a hit, with the loss of 8,400 of those jobs, from banking to retail and hospitality.

The only job gains over the last year came from government agencies, as well as a tiny increase in private-sector management work.

Yes, let me repeat: "The only job gains over the last year came from government agencies ..."

The region is taking a harder hit than anywhere else in the state. Our employment base is down 2 percent over the past year. Rochester, by comparison, is down 0.3 percent. Heck, Utica is  holding up better than us. Utica.

Put another way, we've been down so long, that Appalachia looks like up to us. (With apologies to Jim Morrison. And Utica.)

It's a good thing we have all those wildly successful economic development programs in place to help get us out of this fix.

Buffalo Bills an adopted part of the Maple Leafs family?

Well, at least we could give up any hopes of the team ever making the playoffs.

But seriously, the prospect of the Bills playing more and more games in T.O. is not necessarily a good thing from a purely sporting perspective.

It does, however, present interesting possibilities for those who think our future as a region hinges on our ability to hitch our wagon to Toronto and the Golden Horseshoe. I'll hold that thought for another day, however.

I'm not one to wring my hands over the future prospects of the Bills -- I think we as a community worry way too much. But developments this week are worth pondering, so here goes.

Stephen Brunt, a sports columnist for the Globe and Mail, has a thoughtful perspective that envisions the Bills eventually pulling up stakes and moving north for good, perhaps under the ownership of the group that owns the Toronto Maple Leafs, which is making money hand over fist. 

Says Brunt:

It wasn't hard to find someone who would suggest with great certainty that Rogers Communications was looking to get out from under its commitment to the Bills, that it was ready to wave the white flag, that at least this phase of the plan to bring the NFL to Toronto had been a dismal failure.

The fact that Rogers instead appears poised to considerably increase its commitment -- and increase its risk -- suggests something very different indeed.

It is a clear statement of intent. Instead of backing off, it wants to get in deeper, in a very challenging business environment. And since no one believes the Bills in Toronto series is a cash bonanza unto itself -- ticket prices will be adjusted downward, starting with this year's game -- there must be some larger goal in mind.

Yeah, something that might involve a maple leaf.

Here's another post from Brunt from last May that's worth a read.

Meanwhile, Toronto Sun columnist Steve Simmons has a somewhat different take.

NFL Commissioner Roger Goodell has told people that Rogers Centre is acceptable as a temporary home for a franchise but not a permanent one. Without a new stadium plan, Toronto likely would not be deemed acceptable by the NFL.

I want to return to the prospect of Maple Leaf Sports and Entertainment eventually buying the Bills.

Boy, it sure fits the profile.

Rich: Assets of $1.75 billion.

In the sport business: It owns the Maple Leafs, the Raptors of the NBA, the Marlies of the American Hockey League, and Toronto FC, a soccer team.

In the media business: It owns a television station focused on the Leafs and Raptors and recently bought a digital cable channel devoted to soccer.

In the sports property business: It owns and/or manages Air Canada Centre, home to the Leafs and Raptors, as well as the facilities in which its soccer and minor league hockey team plays.

That's some 900-pound gorilla, eh?

Ignoring the biggest outrage at the Power Authority

Let me interrupt all the bluster surrounding the New York Power Authority's rate hike and possible awarding of bonuses in the wake of turning over $476 million to Gov. Paterson and the State Legislature for this public service announcement:

Everyone is continuing to overlook the real outrage concerning NYPA and WNY, because doing so would require action instead of grandstanding.

Nearly 20 percent of the low-cost hydropower generated at the Niagara Power Project in Lewiston and earmarked for industry here in WNY is going begging for users. 

For the most part, the power, which goes for about a quarter of the market rate, has been allocated to companies that have yet to start using it, including the Globe Metals plant in Niagara Falls, which is taking longer than expected to retrofit its abandoned plant, and two ethanol plants that can't get off the drawing board because the bottom has fallen out of their industry.

The Power Authority sells the unused power on the open market for a huge markup. Last year I reportedthat NYPA would pocket some $45 million over the course of 2008. This has been going on for years, and the practice has earned the authority some $161 million since 2002.

Some of that money has been spent -- not here, of course, but in helping to fund other power programs that benefit mostly downstate business interests, underwrite the authority's costly bureaucracy, and presumably pay the bonuses NYPA has paid out for years.

NYPA did not spend all the money, however. A lot of it went into its piggy bank, which Albany raided a few months back to help close its deficit for the budget year.

With me so far?

The constant pounding the authority has received, first from Rep.Brian Higgins during negotiations to relicense the Niagara Power Project, and the past two years from yours truly, have led to a consensus that NYPA needs to be doing more for WNY. Even Richie Kessel, the new NYPA boss, freely admits this.

Yet nothing of substance has been done. Nada. Zippo.

To put it another way, neither Eliot Spitzer nor David Paterson, nor anyone in the Legislature -- most notably the members of our local delegation on both sides of the aisle -- have done squat.

Neither has NYPA, not under former President Roger Kelley -- he, of Clarence, not that it did us any good -- nor the aforementioned Kessel, despite his oft-stated good intentions.Ditto for our two representatives on the NYPA board, Elise Cusack and Pat Curley.

What to do about all this?

I think it's kinda simple.

The Legislature can introduce -- and pass -- a law that would mandate that the profits from the sale of unused power designated for local industry be earmarked for economic development purposes here.

Yeah, this might not be a slam dunk given the downstate dominance of the Leg, but our delegation was elected to do more than rubber stamp what the leadership puts before them.

And NYPA, for your part, you could return some of the past profits post-haste by funding some variation of the proposal Phil Wilcox and Niagara Green Space Consortium  gave you a couple of weeks ago to clear up two big brownfields, one each in Niagara Falls and Buffalo, to provide the region with two major shovel-ready sites.

Yeah, the cost ain't cheap. But it's a fraction of what NYPA has taken out of this community through the sale of unused hydropower.

In short, it's time to address the outrage in plain sight.

Of firefighters, fast trains and guvs gone wild

Question: What's the difference between the fat bonuses paid by AIG and the fat pensions paid by state and local governments here in New York?

Answer: The federal government is acting to tax the bonuses at 90 percent, while New York state makes the pensions tax free. We suckers who work in the private sector, on the other hand, pay state income taxes on our pensions after the first $20,000.

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I kinda like what Andrew Cuomo is doing with the AIG bonus mess, but Eliot Spitzer is not impressed. Says Andrew is missing the bigger picture.

Meanwhile, AIG gave state Dems $100,000 two weeks before Gov. Paterson said he helped broker a deal to provide AIG with a $85 million loan.

Those crazy guvs - past and present tense.

Spitzer deserved to go, but can you imagine the fun he'd be having with the AIGs of the world if he still ruled the roost? Could we bring him back as a special prosecutor? I'm pretty sure the tabloids in NYC would be willing to foot the bill.

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The General Accounting Office has release a report entitled High Speed Passenger Rail: Future Development Will Depend on Addressing Financial and Other Challenges and Establishing a Clear Federal Role.

Yeah, I know, sounds like a real barn burner.  But at 108 pages, there must be something in there worth knowing.

Anyone want to do a book report for us?

 

 

City firefighters are hosing us on pensions

Sue Schulman's investigation into Buffalo firefighter pensions published Sunday and Monday once again leaves me wondering aloud if anyone in City Hall is really looking out for taxpayers. If they are, they're doing a lousy job.

Consider some of the numbers Schulman turned up in her analysis:

  • Firefighter pay averaged $79,970 in 2008.
  • Those retiring last year are drawing an average pension of $68,000.
  • Firefighters getting ready to retire earned an average of $45,000 overtime in their final year on the job, compared with $16,000 who were not planning to retire.

The way police officers and firefighters are allowed to game the system, and sometimes end up with a pension worth more than their base pay, amounts to nothing less than a fleecing of taxpayers.

I can find fault with those who lack the personal ethics to refrain from padding their pensions - or for calling in sick because of being "demoralized" over a job that pays nearly $80,000 a year, along with gold-plated benefits.

But the real shame lies with the politicians who allow these pension abuses to continue. And that's almost all of them. Starting in City Hall and going all the way to Albany.

Public Payroll Watch has a good summary of Schulman's findings  For more on Buffalo News investigations of police and education pension abuses, go here.

Tom Reynolds principled on pork? Please.

Let me get this straight: Tom Reynolds, a king of pork barrel spending, decided not to seek earmarks for his district on his way out of office as a matter of principle.

Principle?

The words "Tom Reynolds" and "principle" do not belong in the same sentence. Not unless we're talking a comedy skit.

I mean, this is a guy who operated as one of the GOP's major bag men during the Dubya era,  who provided a rubber-stamp vote for every danged fool idea the White House conjured up the past eight years. A guy who some people think gave political hacks a bad name.

Too harsh? Remember his use of children as human shields during the Mark Foley debacle?

As Jerry Zremski's story details, Reynolds brought home close to $200 million in earmarks over the  years. His unnamed apologists said the decision to go cold turkey after opting to not run for re-election was part of an agreement among the GOP to hold off on earmarks until a more transparent system is put in place.

I'll state the obvious and note that the present process is largely a byproduct of the Republican leadership, which included Reynolds, when they controlled Congress.

Moreover, a lot of Republicans quickly forgot about the "deal," among them three other retiring House members who managed to bring tens of millions of dollars back to their districts.

Rather than principle, I figure Reynolds either got lazy on his way out the door or simply wanted to punctuate his exit with a one-finger salute to his constituents.

Message received, Tommy Boy.

Two ways to kill St. Paddy's Day

For anyone interested, I'm appearing on a couple of speaker panels Tuesday, one dealing with economic development, the other First Amendment rights.

First up is a panel discussion from 4 to 5:30 p.m. entitled "Economic Development or Corporate Welfare: Do state and local tax incentives work?"

Others speakers include Jim Allen, head of the Amherst IDA; Brian Reilly, Buffalo's economic development chief; Bruce Fisher, an adjunct prof at Buffalo State College and deputy county executive under Joel Giambra; and Jerry Turcotte of MicroBiz Buffalo.

The session is sponsored by the Partnership for the Public Good and will be held at the Cornell labor School, 237 Main St., Suite 1200.

At 7 p.m., I'll be among the speakers at a panel discussion entitled "On the Front Lines: State Secrets and Journalist Shield Laws/What Next?" The gathering will take place at Cinema at Hallwalls, in Babeville, at 341 Delaware Ave. Jonathon Welch and the folks at Talking Leaves Bookstore are helping to stage the event.

Other speakers will include Joe Finnerty, a top-shelf First Amendment lawyer I've working with over the years, and Geoff Kelly, the editor of  Artvoice.

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