Tuesday, July 05, 2011

The District Attorney Dilemma?

You can't build a reputation on what you are going to do.
Henry Ford

-- 1863 - 1947

With the media second-guessing Cy Vance, Jr. over a very high profile prosecution, the question becomes what is not known, as opposed to what IS known about the case. No one doubts that there was some form of sexual contact, but it becomes murky beyond that. The fact that the current statistics on rape in New York are frightening -- up by 62%, -- may be the subtext to this case, however. It’s the kind of crime and numbers that are very disturbing to women as well as men in a civilized society. D.A.’s are pressured by such alarming statistics.

What was essentially a slap on the wrist, in the recent case involving two police officers accused of rape, may have become the backdrop for potential criticism of the D.A. – despite the fact that Vance’s office vigorously prosecuted the case. But, what is more likely, is that the speeding to indictment of DSK, a powerful international politician, may have backfired. Strauss-Kahn, as head of the IMF and previously, perhaps, in line to run for President of France, is not a man without resources -- despite his obvious lapses of judgment. And, if there is an undercurrent to this matter, the speed of indictment, as against the rising numbers of sexual crimes in our city, helped create a public rush to judgment. The publicity, the media, loves a good Greek Tragedy – a man of high station brought low by hubris. And, schadenfreude, is not just a “disease” known to journalists and the paparazzi.
But, unlike other D.A.’s, Vance does support the original American theory of Justice – that one is presumed innocent until proven guilty. It’s just that the media makes that concept unwieldy. In New York there are many media voices, but, in suburbs like the Hamptons, it speaks with one voice – a fearful one where the D.A. controls every utterance – or else.

Meanwhile, after leaving Riker’s Island, Strauss-Kahn hired one of the best criminal lawyers in the country and some of the best investigators on the planet. And, he also hired a prestigious “consulting” firm of former Intelligence officers to work on the case. You don’t want former U.S. Attorneys, Secret Service Special Agents, retired CIA, and FBI investigative specialists on your ass if you have anything to hide. And, apparently, the victim did. Spooks are smart and dispassionate about their business. When they are in private practice -- you don’t want to go there. As occurred in the recent retaliatory strike against Bin Laden, a “dish served cold” is an appropriate phrase that comes to mind.

But, what needs to be remembered here is that Cy Vance, Jr. ran for office as a Progressive. And during an interview we had several years ago in SoHo, what was clear about him is that he had purpose and was on a mission to open up the D.A.’s office, modernize it, and bring it to the people in the community. He has been doing that. Bob Morgenthau supported Vance and he was the clear choice over Leslie Crocker-Snyder, a Conservative take-no-prisoners, former Judge.

During an interview of former D.A. Bob Morgenthau, known as “the Boss” he spoke of the heritage of the Hogan office and his groundbreaking DNA indictments in absentia – which preserved the statute of limitations on rape. In his nineties, though, he had had enough and wanted Vance to take his place.
Richard Aborn, who has done a tremendous job as head of the Citizen’s Crime Commission was also in the running, but had a less cohesive campaign organization. He was, nevertheless, an impressive Progressive candidate as well as an attractive candidate for the office. In our interview he was clearly a powerful presence.

If the Manhattan D.A. made mistakes, the Hobson’s choice here may have been in deciding to not allow Strauss-Kahn to leave the country as opposed to speedily presenting the case for indictment as justification. While there was a fear that he would flee, he was an internationally known politician. He is not Roman Polanski. The vision of the Port Authority Police, whose most difficult work is patrolling the Holland Tunnel entrance for “terrorists,” dragging the President of the IMF off of a plane – is more akin to a Leslie Nielsen movie – than high-stakes law enforcement.

Cy Vance is a District Attorney who is ethical and effective. His office may have erred on the side of caution and had the good grace to face the music personally. The Media is not always kind. But, in Manhattan, at least, it is not owned. Freedom of the Press is alive and well – unlike Suffolk County where it is owned and operated by the District Attorney.

Cy Vance will heal from this, at worst, sin of omission and we should be grateful to have a District Attorney who deals in Justice, not in retaliation and intimidation to do his job.

Tuesday, February 01, 2011

Just When You Thought It Was Safe

Economics is extremely useful as a form of employment for economists.
-- John Kenneth Galbraith (1908 - 2006)

With all of the conflicting reports about real estate and the housing market, perhaps a little perspective is in order.
In Manhattan, rents have settled and are trending higher. There are some great deals in the Battery Park/Wall Street area. Things are still a little desperate there but $2000 for a studio/one bedroom (depending upon how much sleeping space you need) is sort of the bottom rung. Sales are moving along in Manhattan but even formerly hot properties are still only lukewarm. Old line brokers like Robert Agee at Quattrone are doing fine. Upstarts have had to trade in their new Mercedes.

The story in the Hamptons is a little murkier. Since East End brokers tend to start telling the truth about business 3 or 4 quarters after reality is painfully obvious, it is safe to say that sales are very slow, prices are off by 30 to 50 percent (from 2006) – depending upon which Hampton and how exclusive the location is – and certain price ranges do not move at all.
From those brokers who will talk, we’ve learned that properties in the $300,000 to $500,000 price range are moving (Hampton Bays) and there are mortgages available. Properties sales in the $500,000 to $1 million range (Southampton) begin to get very dicey. And, from $1 million to $3 million sales (East Hampton) only occur when the original price has been discounted by at least 30%. Above the $3 million to $4 million range (Water Mill/East Hampton/Southampton Dune Road), sales begin to pick up – since that is generally the all cash purchase territory of celebrities and hedge fund buyers. Above and beyond that range it is all Goldman Sachs types using taxpayer’s money to fund their lifestyle, compliments of the Federal government (East Hampton Dune Road/Quogue Dune Road). Those have lots of hedges and front on the ocean for safety.
In Westhampton Beach Village, the Performing Arts Center showed Inside Job for one day last weekend. In that Village, the government is partially asleep and numerous commercial establishments are shuttered and out of business. Since East End media has no “voice of opposition,” there is little to learn about the workings of each of the monolithic governments in power or its sycophants. Occasionally, a local blogger will spew forth half-truths and venom but mostly independent writers toe the party line or are shut down by local law enforcement. Freedom of Expression or Freedom of the Press gets in the way of politics on the East End and therefore accurate business news is almost as difficult to report as politics or corruption. Perhaps Michael Moore will pay a visit soon.

Commercial real estate continues to drop along with residential property values in the Hamptons (Richard Silver at Norma Reynolds in Westhampton Beach is reliable) and the trend will continue as New York City and New York State continues to attempt to find money. No one knows, yet, what affect the reduced number of real estate transactions has had on the Town of Southampton – and whether the Preservation Fund or its general coffers will affect civil service jobs. Default on interest payments and possible Chapter 9 bankruptcy has not yet been broached by Anna Throne-Holst or the Town Board but is a subject on every political leader in every one of the hundreds of municipal governments across America. Perhaps Goldman, Bank of America or Countrywide executives who might buy the newest mansion in the Hamptons might offer the Town advice on how to move the debt and risk “off balance sheet” as they did with Greece. A reader writes:

“Goldman Sachs has admitted that it is under investigation for helping Greece to hide its vast debts.
The controversial Wall Street bank - nicknamed the Vampire Squid because its tentacles stretch far and wide - is accused of having profiteered out of a complex currency deal that helped Greece massage its finances.
The Wall Street giant is claimed to have received as much as £192m in fees by entering a complex currency transaction in 2001 that helped Athens borrow cash without putting it on the books as a loan.
Goldman Sachs was once seen as the invincible bank that could beat other firms hands down. It has always paid vast sums of cash to its employees, so it can employ the hottest talent in the financial world.
America's Securities and Exchange Commission accuses Goldman of misleading its own clients and encouraging them to invest in a product that was destined to fail.
The lawsuit centers on trades set up by its sub-prime mortgage trader Fabrice Tourre, who has since been placed on 'administrative leave'.”

In general, the housing market has a very strong effect upon the health of the economy. And, the prognosis is the it will take close to six years before real estate can normalize.
There is a temporary lull in foreclosures as the banks dig out from under their own fraudulent behavior and there are some 11 million people whose properties are worth less than their mortgage.
A tsunami of foreclosures will resume some time this year or next and this will depress prices and add to the unemployment numbers. We are at the precipice of a “double-dip” recession which, for many, will just be a continuation of what has not seemed at all like the end of the last one.

Saturday, January 01, 2011

The Double Dip - Part Deux

If you want to tell people the truth, make them laugh, otherwise they'll kill you.
-- Oscar Wilde

As previously reported (January 22nd “Double-Dipping), there is renewed interest in what we have been writing about. Actually, what has currently been written about is tame by comparison to what is going to happen. The median drop in housing prices across the country is roughly 30% off the peak. In reality, many areas have experienced reductions in housing prices of nearly 60%.
In the Hamptons, property values have dropped an average of 50% from the peak in 2006, with the exception of certain, very limited “trophy” properties. Essentially, this means that the “fool and his money are soon parted,” theory is alive and well. Investors are still on the sidelines and starting to drink heavily. Commercial property continues to drop.
While prices of condos have maintained their “value” in Manhattan, renting is the new buying. Prices have temporarily stabilized on sales but have suffered from lack of financing. Neither is the case in the outer boroughs.
The Trump SoHo property, a condo-hotel, is entering foreclosure and suffers from a multitude of lawsuits from buyers who claim they were misled and want their money back. This particular development is an indication of the overzealous fantasies about real estate and its imperviousness.

Of course, all of the above is really too optimistic. Few discuss the real El Grande problem, such as the Depression lurking around the bend.
If we limit discussions to housing and property values, the truth is that we will soon be experiencing a tsunami of foreclosures all across the country.
As a result of the “robo-signer” controversy which, basically, caught the banks with their pants down as they inspected the “irregularities” (translated=Fraud) in their foreclosure process. And, what was also exposed along with this problem is the fact that they may never have owned the properties in the first place. Establishing accurate title between the SIV’s (securitized investment vehicles) and the CDO’s (mortgage bonds) is next to impossible. Not even the bank’s foreclosure attorneys are sure that their clients own the properties that they seek to recover.

The next problem, aside from the fact that no recovery will take place until banks start to lend again, is the fact that municipal bonds may go the way of Free Speech in America. Down the toilet. It is not only in Russia that the government tries to silence journalists. Mainstream media is in severe jeopardy for all sides. Besides the Internet threat, the severe drop in advertising and pressure from the government to curtail criticism of its policies – have dovetailed to make publishers vulnerable.

The bonds that packed the toxic mortgage debt into CDO’s (which the prescient banks insured themselves against with CDS’s) are still held by Villages, Counties, States and Counties across America. And, these same municipal entities issued bonds in order to raise money for their bloated budgets – which counted on tax proceeds and transfer taxes for pay for everything from Police to Tax Assessors. Pensions are likely to be one of the targets eyed by bleary-eyed accountant/administrators. In the Hamptons, as in Suffolk County, retirement benefits are often a rigged game. For example, if you have 20 years of employment in civil service, the monthly retirement check is based upon the last year’s salary. Overtime can change the salary base dramatically. So, a job that paid a $75,000 salary for 19 years, can suddenly become a $150,000 a year job for the last year of service. The last year is used to calculate the retirement benefit. Police Departments use this ploy since emergencies often occur and overtime is arranged based upon seniority and political connections -- but politicians, as well, are among the most cynical players in making these arrangements for themselves.

Obviously, this is tantamount to fraud and is intended to rape the taxpayers. During these horrendous economic times, while people are scrounging for food, a retirement based upon $150,000 per year when the regular salary for 95% of the employ tenure is $75,000, is stealing.

As municipalities start to file Chapter 9, many unpopular decisions will have to be made. One of them is how many, not whether, employees have to be dropped. Pensions will need to be cut and in some cases eliminated.
While this inevitability may have been behind the supposed slowdown creating snowstorm problems in Manhattan (employee reductions), there simply is no choice. The Feds can print more money, the States cannot. And, if the international community rejects the dollar as the Reserve Currency all bets are off. Prices would skyrocket immediately.
At present, all of our imports are paid for in dollars. We do not have to exchange our currency into the currency of the exporting country– everything is dollar denominated. Were the Reserve Currency to be another denomination, we would first have to buy that currency and then pay the bill. Right now, if we are short on cash we just print more. Other countries are on to that and cannot do anything about since we issue the Reserve Currency. That would all change immediately if the dollar were rejected as the World’s medium of exchange.

Until the foreclosure mess plays out and housing bottoms, municipalities deal with budget reality, pensions are reformed and expectations are lowered by everyone – the recessionary spiral will end in a Depression. It will be a Depression that has many wealthy people associated with major corporations and Wall Street. But, for those of us on Main Street it will be another 5 to 10 years before this is over.

Be prepared for Code Enforcement, Police and Prosecutors to fine, arrest, indict, imprison and confiscate everything and everyone that they can get their hands on – simply to justify their employment. In this environment you justify your job by bringing home the bacon.
And, this includes the massive seizure laws that have made police departments and political coffers a thing of amazing beauty.

But, the game is over. Every penny counts as we head into another major downtrend.