BUSH, RATNER, AND THE ECONOMICS OF SECRECY

The Bush Administration has decided not to enact regulation of hedge funds but rather to let them police themselves, according to the front page of today’s “NY Times.” While that may seem a remote issue to many Americans, the fate of their pension funds and investments are effected by the fate of these tools of the financially elite. The hedge involved does not serve the interests of the small investor much less those dependent on the financial markets for their stability. If hedge funds go down, they land on us in the middle and at the bottom.

Congress according to Barney Frank is apparently not planning to enact legislation any time soon to protect the public either. When you get your statement from your pension fund, you will not be able to winnow out the influence of hedge funds but it’s there in their heavy market participation. Their secretive nature shields them from the ‘reasonable man’ protections of fiduciary trust. This is not the old boys’ club stuff of the 80's, but a new way of circumscribing a portion of the economy for the prosperous who can afford nominal – and sometimes drastic – risks at the public’s expense. That is perhaps the most damning symptom of Bush economic policy, but it’s hard to detect at street level until things really fall apart.

It is in that sense like the problem of global warming. When it’s less serious, it is harder to see the effects so the public does not focus on it. On the other hand, when the damage starts, it’s very hard to correct and takes a very long time. That is precisely what is happening with Mr. Ratner’s ‘dystopia’ in the Atlantic Yards; a dystopia being a kind of anti-utopia where life is rendered inert and impossible. He has been able to create a secretive house of cards around the financing of the project while protecting his interests and those who go along with him. They are the ones he deems worthy of his financial inner sanctum. That includes members of the financial community as well as local politicians and community advocates thus far including local cultural institutions like the BP Library.

It is not that the Bush Administration has fostered the creation of FCRC’s dystopia, although the paternalistic way the AY Project has been troweled onto the community no doubt has their approval. They believe in top-down public policy. It is that presidents set the tone of behavior especially in business where politics and enterprise often feel they have one and the same interests because, through lobbying, they often do. Six years of Mr. Bush have been very good for big business and for the wealthy in general in special tax abatements and deregulation. Where oversight could not be eliminated, it has been under-funded out of existence.

Bruce Ratner has engineered an amazing example of both a lack of financial oversight and an extraordinary disconnection from the normal processes by which the public wealth, and even that of investors, are protected. I have in front of me a letter from Christine Quinn which essentially states just that and admits defeat in the face of the forces arrayed by Ratner against the City Council. None of the processes and reviews that the City would normally employ have been implemented in this instance. It seems impossible to imagine such a state of affairs if the entire apparatus of financial public oversight had not been dismantled or left to rot on the vine as a matter of national public policy.

Quinn does say that the Council is still pushing for a traffic study that will insure some flow of vehicles when the AY is built if it ever is. So, as you can see, the traffic problem is indeed like the problem of global warming. Both situations are bad now, but if left unscrutinized and unchecked, they will both become horrendous and nearly impossible to correct for decades. It hardly helps when local journalists cannot see beyond the moment. They simply point out that Ratner tends to lie from time to time.

This whiney approach fails utterly to envision the implications of what all that lying will lead to even as the project is being built, much less when it is completed. It is even worse when major dailies like the Times fail to report more than the marginal details of the situation as local feature stories. Surely a paper that employs an architecture critic can see that building a mid-sized city in the downtown of Brooklyn is going to affect the whole of NYC, and certainly Manhattan. Where is Paul Krugman when we need him? I guess he can’t do everything, and our local papers cannot keep up with the pace of the game.

What is more, within the last two days the need for the Freedom Tower has again been questioned as there is already a glut of office space in the area. Why then do we need this massively dense construction in Brooklyn which the designers themselves claim will be one of the most densely populated zones of human activity on earth? Its right across the East River. The builders are already imaging the Freedom Tower as stuffed with government offices. We have that now in the Atlantic Terminal. So we will pay taxes to to cover FCRC’s tax abatement and pay rent to Ratner so that he can erect buildings we do not need.

“Wait and see” is not a solution. “Looking away,” is less of one. “Shoot them all and let God work it out,” is not even a clear statement of intention, but that is where we are in terms of the future of Ratner’s AY dystopia.

Any student of probability can see that we are setting ourselves up for things to become exponentially and catastrophically worse. What else can investors and the public expect when we create secret, exclusionary investment zones for the rich; and at the same time give mega-developers a free pass to avoid minimal and fiduciary and municipal oversight.

Steven Hart


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