IS RATNER’S BAILOUT BE NEXT? HAVE WE LEARNED ANYTHING AT ALL?
Maybe, and maybe not.
We are about to guarantee the questionable value of paper that banks created loosely based on the value of real mortgages that they bought from local lenders. It was a mathematical house of cards in which the joker was the “derivative”. They thought to secure the value of that paper by slicing and dicing the risk, but the risk was still there. It was just spread all over the world in very small bits.
You and I are not securing the mortgages themselves, only paper that was issued against the anticipated value of that paper – such as derivatives -- on the market. It was financial flim flam. Now imagine Ratner and try to picture him in his current financial situation. Doesn’t he seem a likely fellow to have a cruder version of a bailout in mind? Or Mr. Stein with his hole of uncertain completion? Or the Toll Brothers for that matter, if any or all of these guys don’t get to do what they wanted to do which was speculate on the worth of our community at our risk.
Ratner sought to shovel the lion’s share of the risk onto the public by having them underwrite, as well as directly pay for, most of the Atlantic Yards. He is a natural for a bailout as he may even try to claim the loss of his project will harm the economy of Brooklyn. No doubt he is considering a plea for a bailout for FCRC as his plan sinks into the coming real estate recession. It will be a hard case to make to Governor Paterson, but nothing seems beyond the pale for Bruce Ratner to try.
But we need to think about our role this issue of public versus private finance on a very local and a very grand scale. We are now asked to get the credit markets going again by backing dubious paper that should never have been allowed as an investment product. It was a sham because it was building a diving board of speculation on a flimsy base of another layer of speculation. It is what gamblers do when they sink further into debt. They gamble more and get deeper in debt-- and WE, not Wall Street, are in mega-debt to such warm allies as the People’s Republic of China with this bailout.
Worse still, this sort of speculation defeated the entire concept of the responsible lender taking reasoned risks to support the long-term future of a community like Brooklyn. Who owns your mortgage? Do you have any idea? Do they give a damn about Brooklyn? Do they know where it is? Do they care, or do they only care about the paper they backed based on its projected worth?
Whether Ratner tries this unlikely gambit or not, he will probably find it unconvincing now that the free marketeers of George Pataki are out of Albany. On the other hand, Mayor Bloomberg and the state of New Jersey are seeking bids from private entities to develop off shore wind power. Did we learn NOTHING from the Enron energy fraud debacle? Are we learning nothing from the current banking crisis? Do we learn nothing from the government subsidized windfall profits of the oil industry?
T. Boone Pickens has a good idea about a broad, general energy initiative, but he made his bucks in the OIL business, and he has been up to his neck in that odiferous goo all his life. Mr. Pickens is one of the people who got us here. Here, by the way, is not an oil shortage. That is the small end of the problem. It is an environmental crisis. Mr. Pickins hasn’t owned up to his part in that any more than he has seen fit to recant funding the Swift Boat disgrace in the 2004 election. Do you really want men and women with his sense of honor and the common good deciding the fate of your children on this planet?
What we need is a national power authority that subcontracts, if necessary, research and development to the private sector as well as universities and public research institutions. We do not need people trying to patent the wind. CONED offered to let me pay extra so I could have some of my energy generated by wind last month. They want to own the wind and sell it to me at a rate above fossil fuels? Are these people truly nuts or do they take their cue from Karl Rove?
The private sector has two failings. Its interests are entirely directed inward toward the advancement of the corporation and its shareholders. Nobody needs that in energy, health, education, infrastructure, pensions, or for my money, mortgages which often shape the financial character of the community. Secondly, American private industry is chained to the slavery of the short-term gain. That is fine if you need to crank up the balance sheets for times a year for greedy investors. It does nothing productive whatever for the common good.
Call that socialism if you like, because it is. But remember, any society that has a public road is a socialist society including Texas. All socialism means is that the community realizes that there are certain things that are better handled collectively for the long-term interests of all rather than parsed out to narrow individual short-term gains.
The evidence is sitting there from the Savings and Loan Mess that we are still trying to recoup to Chrysler, to Enron, to third world state of American health care, to the pathetic drooling, stumbling, indolent state of American public education. The majority of the country can barely read, and a substantial portion of the population that claims to be literate cannot analyze what they are reading. Perhaps that is why we are about to give away the store again to the same collection of pin-striped thieves by privatizing energy AGAIN and holding our future hostage to nitwits and bandits in the process.
Bruce Ratner is not likely to get a bail out, nor should the greedy slug that is the American energy industry as oil becomes as obsolete as whale oil once was.