2008 Financial Crisis | The New York Observer

Bloomberg Breaks Out the Elbow Grease for Wall Street

Wed, 18 Feb 2009 15:54:36 -0500

After Lehman Brothers collapsed last fall, it quickly became clear to the Bloomberg administration that the spiraling economic crisis was going to hit New York especially hard. The financial sector had been the city’s economic engine, driving real wages and estate prices up citywide.

So the Bloomberg administration did what it so often does when it wants to think big: It ordered the creation of a point-by-point action plan, fed in...

The Frat Boys Who Lit the Boom

Fri, 16 Jan 2009 11:56:53 -0500

The Journal's Matthew Karnitschnig and Susanne Craig have the low-down on last week's annual gathering at the St. Regis of Wall Street's very own secret fraternity, Kappa Beta Phi, which contains some of the true titans of city-based finance. The frat's current mood, understandably, is a bit sullen, like a bad hangover you simply can't shake:

"I feel like the mayor of New Orleans after Katrina," quipped Alfred E. Smith IV, the group's leader, or...

A Short-Term Curse

Sun, 04 Jan 2009 11:49:39 -0500

Author Michael Lewis and hedge fund manager David Einhorn in The New York Times over the weekend on the genesis of the current crisis: "Our financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the...

'08 Greatest Hits: The Effects of It All

Wed, 31 Dec 2008 14:38:19 -0500

Our last look back at '08 today. Happy New Year and see you tomorrow! Be safe.

September 23

The Tie Jones Average

Ask anyone around Wall Street these days: Are bankers still buying ties? Inevitably, someone will respond, “What, to hang themselves?”

“Isn’t this a cool tie?” gushed an eager saleswoman at the chic Hermès boutique at 15 Broad Street, conveniently across from the New York Stock Exchange.

It was a lustrous, sky-blue...

Ominous Quote of the Morning

Wed, 31 Dec 2008 09:56:07 -0500

From that Wall Street Journal story this morning on New York housing's specious buoyancy: "'Right now, people are still living on last year's bonus,'" says Barclays Capital economist Ethan Harris, who is based in New York. "'You can sort of feel the local economy on the edge of a...

Lehman Looking for Office Space

Wed, 17 Dec 2008 16:23:00 -0500

From Crain's: "Even in bankruptcy, Lehman Brothers Holdings Inc. has not lost its hunger for space. The failed investment bank is currently looking to lease somewhere between 150,000 to 250,000 square feet of space, real estate sources said. ... Sources said Lehman needs the new space for the employees who will continue to work at the company to manage the fallout from the bankruptcy. They say it seeking a short-term lease for roughly three...

Never Mind Housing Costs! Half the City Needs Help With Groceries

Wed, 17 Dec 2008 09:34:53 -0500

The number of city residents who have difficulty affording food has doubled in the past five years, according to survey released Tuesday by the Food Bank for New York City.

Roughly four million New Yorkers—one in two—have trouble paying for groceries, the survey found. That's a 26 percent spike since the last survey was conducted in February.

The survey also found that more than half of the households with children...

Brew Knew? Beer-Making As Sharp Financial Move

Tue, 09 Dec 2008 17:02:52 -0500

Damn, it was easy, I wish I'd done it before! Long before. I capped, one day and 75 years after the end of Prohibition, 528 ounces of dark stout beer in my Brooklyn apartment.

First time. And no muss and little fuss. What an era and a borough for it all to go swimmingly in: Brooklyn, before Prohibition settled over the U.S. in 1920, was one of the wettest areas...

The Local: Condo Buyers Beg Off

Sun, 07 Dec 2008 20:22:22 -0500

When New York’s real estate market was at its peak, condo buyers and investors were not in the position to quibble if the ceiling of their new apartment was a few inches shorter than the one in the sponsor’s offering plan or if common charges were a couple hundred dollars more than expected. Now that the market is in the throes of a recession, those same buyers are finding themselves with the upper hand...

Concierges Service the Downturn

Thu, 04 Dec 2008 07:59:24 -0500

Once upon a time, a certain Floridian man required the services of a private jet. His girlfriend had spotted a pair of designer shoes, and she simply had to have them. But there was a problem: The shoes didn't fit, and only one store in the United States had the appropriate size. It was in Los Angeles. She was in Miami. So a staff member at Quintessentially, the high-end concierge service, arranged to send...

How Government Actions Miss the Point (Hint: It's About Mortgages)

Wed, 26 Nov 2008 12:15:51 -0500

The Wall Street Journal's Dennis K. Berman interviews Columbia business professor Charles Calomiris about why the government's current frenzy of efforts to stabilize the economy could ultimately falter. It's got to do with all those still-bad (in many cases) mortgages backing up securities.

DJ: There’s this perception that we can “fix” the price of individual mortgages. But shouldn’t the price of homes find its natural equilibrium?
CC: The market price is...

State Comptroller Predicts City Could Lose 48,000 Financial Jobs

Tue, 25 Nov 2008 14:42:21 -0500

State Comptroller Thomas DiNapoli's office has issued a predictably grim assessment of the city's securities industry going forward. Here's the take on job losses, which could rattle through real estate and beyond in 2009:

As of October 2008, the securities industry in New York City had contracted by 8.7 percent. A 20 percent reduction would translate into a loss of nearly 38,000 jobs in the securities industry. We expect to see additional losses, although...

You're On the Hook for $306 B. of Citi's Real Estate-Backed Securities

Mon, 24 Nov 2008 12:33:26 -0500

As part of Citi's $40 billion deal with the U.S. Treasury, the FDIC and the Federal Reserve, the government will guarantee the financial giant's loans and commitments backed by residential and commercail real estate assets.

From a Citi breakdown of the government deal: "Citi will issue an incremental $7 billion in preferred stock to the U.S. Treasury and the FDIC as payment for a government guarantee on $306 billion of securities, loans, and commitments backed...

The Local: Code Red on Black Friday

Sun, 23 Nov 2008 19:42:27 -0500

Recession or not, when Erin Lima makes the trip from Philadelphia to New York City, “shopping is inevitable.”

“Every time you come here you have to,” she said, while browsing the handbag section of Bergdorf Goodman on Saturday with her husband in tow. “You can’t help yourself.”

The Limas and another couple got “the best deal ever” on a weekend at the Embassy Suites Hotel in Battery Park...

City Expects Wall Street Bonuses To Plunge Over 50 Percent

Fri, 21 Nov 2008 15:28:50 -0500

Hold on to your hats, ladies and gentlemen, Wall Street bonuses are headed for an epochal fall. According to estimates from the city Comptroller’s office provided to The Observer today, year-end bonuses will total $14.5 billion for 2008, an over 50 percent drop from 2007, when $28.9 billion was paid out to Wall Streeters.

Of course, the figures are merely an estimate for now, but the low projection jibes with the bleak year in...

J.P. Morgan Shedding More Investment Bank People

Fri, 21 Nov 2008 12:56:27 -0500

From the Wall Street Journal: "J.P. Morgan Chase & Co. began handing out pink slips to employees in its investment bank, becoming the latest Wall Street firm to slim its ranks amid a gloomy outlook for next year. It is yet another round of cuts at J.P. Morgan's investment bank, which cut about 5,000 jobs earlier this year following its acquisition of Bear Stearns Cos. A J.P. Morgan spokeswoman said the bank hadn't determined...

Expectations Be Damned! City Joblessness Flat

Thu, 20 Nov 2008 16:29:13 -0500

So much for that narrative! Counter to the stories upon stories of an economy in freefall, people are still working; at least they are according to October jobs statistics released today by the New York State Department of Labor.

Unemployment actually fell, albeit marginally, in New York State, dropping from 5.6 percent in September to 5.5 percent in October, while it remained unchanged in New York City at 5.7 percent (the national unemployment rate was...

Now It's 70,000 Financial Services Layoffs

Mon, 17 Nov 2008 17:44:04 -0500

From The New York Times: "However dismal the outlook for Wall Street workers appeared at the end of the third quarter, the situation has gotten worse than most predictions. At the beginning of September, Moody’s Economy.com had predicted that 45,000 to 65,000 financial workers in the New York area would lose their jobs by the middle of 2010. Now Moody’s is predicting 70,000, even accounting for the fact that some workers would find new...

That's That: Feds Nix Bailout's Original Mortgage-Related Purpose

Wed, 12 Nov 2008 14:34:07 -0500

The original purpose of the federal bailout pitched to the public and passed by Congress in those heady days of October was to allow the government to buy up distressed mortgage-backed assets, do what they could to help homeowners and investors in trouble, and then eventually sell the securities to reap (it was hoped) a profit for the taxpayers footing the enormous bill.

No more.

Reports are trickling out (CNN here and the Journal here) that...

Cheers: Time Out New York Tells You Where Laid-Off Media People Are Drinking

Tue, 11 Nov 2008 15:59:44 -0500

In what is perhaps one of the most dissonant press releases Media Mob has gotten in a while, a press representative from Time Out New York is touting the magazine's Where Laid-Off Workers Go To Drink spread.

Asks the flack:

What happens when you show up at your gig at Radar only to find the magazine's folded? Or if Nick Denton unexpectedly boots you from your blogging duties? What would you do if...

News Corp. Cuts 2009 Profit Forecast

Thu, 06 Nov 2008 12:48:54 -0500

Bad news for News Corporation, owners of Fox News, The New York Post, The Wall Street Journal, HarperCollins, 20th Century Fox, and a number of other major media properties.

According to Bloomberg's Andy Fixmer:

News Corp., the media company controlled by Rupert Murdoch, plunged as much as 16 percent in New York trading after cutting its 2009 profit forecast because of shrinking ad sales at its Fox stations and newspapers.

News Corp. sank...

Wall Street Bonus Cuts: Who They'll Hit

Thu, 06 Nov 2008 11:44:25 -0500

According to two experts consulted by the Wall Street Journal, year-end bonuses for Wall Street employees will fall this winter between 20 and 50 percent from last year, when the big investment houses awarded $33.2 billion in bonuses. That would put the total payouts somewhere between $16.6 billion on the low end of the spectrum and $26.5 billion on the high end. Bonus cuts will vary depending on the job description, with bankers and...

At Museum of American Finance, Challenge of Cataloging History in Real Time

Mon, 03 Nov 2008 14:48:52 -0500

Leena Akhtar is fielding more questions about the Great Depression than ever.

As exhibits and archives manager at the Museum of American Finance, Ms. Akhtar curates the displays, such as frozen pork belly that illustrates "Commodities" or rococo cash registers that mesmerize the teenage girls. The mission of the Smithsonian-affiliated teaching museum is, in part, to educate the public about capitalism. But September's events presented the museum with...

The Local: Wall Street on Election Eve

Sun, 02 Nov 2008 20:41:17 -0500

Rocky Twyman, a Seventh Day Adventist who rallied hundreds of Americans to pray for lower fuel prices at gas stations across the country last spring and summer, camped in front of the New York Stock Exchange on Halloween for the inauguration of his latest movement: "Pray Down the Greed on Wall Street."

"This is just the beginning of our movement," Mr. Twyman said as a camera crew lingered impatiently for an interview. "We are...

Hedge Funds, Last Great Office Market Hope, Starting To Bail

Wed, 29 Oct 2008 15:15:56 -0400

Hedge funds were supposed to be the saviors of the higher-end Manhattan office market as the credit crunch and the financial crisis claimed Class A leasers like Lehman Brothers, Bear Stearns and Merrill Lynch, and generally contracted what had been a boom real estate sector.

Now, according to Real Estate Weekly, these saviors are starting to pull back. Reporter Daniel Geiger cites several hedge funds that are either shedding space, subleasing it, or edging...

Will $20 B. in Bonuses Be Enough To Save Real Estate?

Mon, 27 Oct 2008 13:46:54 -0400

Bloomberg News reports today that Wall Street investment firms, even in the midst of the financial crisis, could dole out as much as $20 billion in year-end bonuses. Goldman Sachs, for instance, currently budgets an average of $210,300 for each employee, a 32 percent drop from 2007's average but still significant.

The real question now is what effects these bonuses will have on New York real estate in early 2009. Traditionally, the bonuses trickle...

The Local: FiDi Five Weeks On

Sun, 26 Oct 2008 22:20:22 -0400

Symptoms of the credit crunch in the Financial District became obvious over the summer, when commercial and residential vacancy rates rose and a slew of new luxury condos spilled onto the market as rentals. Now, signs offering occupants incentives like no brokers’ fees and one month’s free rent are as plentiful on the sidewalks as camera-toting tourists.

The Financial District has certainly become an apartment hunters’ market since Lehman Brothers officially folded just over...

'Williamsburg II' Disembarks

Sun, 26 Oct 2008 17:14:06 -0400

Over the last few years, something like conventional wisdom cohered around northern Staten Island: New development and new arrivals would make it the New Williamsburg.

Art galleries, bars and cafés opened near the ferry to Manhattan. The first annual Rock the Harbor music festival took place last June. A graffiti artist scrawled "Williamsburg II" on construction fences. The New York Times a year ago dubbed the North Shore "Bohemia by the...

WSJ Circ Preview: The Soft Pride of Low Expectations

Tue, 21 Oct 2008 16:29:44 -0400

In early September when Robert Thomson and Tina Gaudoin revealed The Wall Street Journal's luxury insert WSJ. at a lavish breakfast for reporters at the Morgan Library, Mr. Thomson, the paper's managing editor and editor in chief of Dow Jones & Company boasted:

'The eschatological angst that characterizes much of the newspaper industry does not define Dow Jones. You'll see when the next round of circulation figures are released just how robust, how rosy our...

So Hot Right Now: Socialists

Tue, 21 Oct 2008 13:36:47 -0400

The Atlantic's Ta-Nehisi Coates points us towards an article by Rex W. Huppke in yesterday's Chicago Tribune in which a member of the Communist Party USA denounces Republican presidential nominee John McCain's assertion that his opponent's economic plan is tantamount to socialism.

Mr. Huppke quotes John Bachtell as saying:

'Red baiting is really the last refuge of scoundrels... It has nothing to do with the issues that are confronting the American people right now....

Times Article on Stress Causes Stress

Tue, 21 Oct 2008 12:28:14 -0400

The New York Post isn't the only local paper with egg—or Iranian caviar—on its face today.

The New York Times ran an unusual correction for an October 14th story by 'Itineraries' writer Paul Burnham-Finney headlined "Upgrading the Stress Levels."

According to the correction:

An article in the Itineraries pages last Tuesday reported about the increasing stress on business travelers, and cited the findings of 'Stress in America,' an annual survey of the American...

A Patio Man For All Seasons: Brooks Resurrects An Archetype

Tue, 21 Oct 2008 11:43:13 -0400

Hey, look who's back! America's old friend, Patio Man. In his New York Times column today, David Brooks offers "Patio Man Revisited," a little check-in with his archetypal (white) suburban everyman whom he introduced to readers in a 2002 two-part story in The Weekly Standard.

Back then—when President Bush's approval rating was at 63% and crude oil was at about $24.00 per barrel—Mr. Brooks wrote:

I don't know if you've ever noticed the expression...

Did De Niro's Greenwich Hotel Pick a Bad Time?

Fri, 17 Oct 2008 10:43:06 -0400

The Wall Street Journal's Laura Landro drops by for a review of the Greenwich Hotel in Tribeca, co-owned by none other than Bobby De Niro. Ms. Landro seems rather impressed by it all ("We gave high marks to the comfy Dux bed, the marble bath with its Moroccan tile floors, dual-head shower... and short but deep soaking tub, and the room's large high-definition TV... Our higher-end room was spacious by the standards of many...

Why in the World is Dov Charney on the Cover of Portfolio?

Thu, 16 Oct 2008 13:12:10 -0400

At a moment when the market is crashing and we're still trying to make sense of why the Dow goes up 900 points one day and down 700 another, when The Washington Post, The New York Times and The Wall Street Journal cover the crisis on their front pages daily, and a once-in-a-lifetime story lands in your lap, is there a monthly magazine better positioned than Portfolio to break this story down?

The Condé...

Damn, It Feels Bad to Be Dated

Thu, 16 Oct 2008 11:28:23 -0400

Eric Konigsberg has a lovely piece in today's New York Times about the 26-year-old author of Damn It Feels Good to Be a Banker, a recently published satirical handbook to the now-endangered species of young financiers who used to frolic around this city. Author Amit Chatwani tells Mr. Konigsberg that he and his publisher, Hyperion, expected the book to sell better, but that was before all of the circumstances. "I’m kind of hoping that...

Economist: Local Housing Market Blinded Voracious Wall Streeters

Wed, 15 Oct 2008 16:13:59 -0400

Could the, until recently, ever-skyrocketing housing market in New York City have blinded Wall Street to the turmoil already afflicting the rest of the nation?

Barbara Denham, chief economic for real estate brokerage Eastern Consolidated, explores that angle in the essay below. It's no excuse, of course, but it might help explain how so many ostensibly intelligent people resisted the evidence accumulating in the rest of the country that real estate assets were drastically over-valued.

...

We'll Split Rent Evenly and Other Roommate Lies of Post-Boom New York

Wed, 15 Oct 2008 13:33:27 -0400

On May 2, George Noia moved into a two-bedroom basement apartment on Long Island. His bedroom was small and windowless, and the kitchen held only a microwave and a hot plate. But of all the places he had seen, the one on Revilo Avenue in Shirley was the cheapest, at $130 a week.

Until he found out that his roommate was scamming him.

"When I heard...

Indian Collection Agents Become Indebted Americans' Quasi-Therapists

Tue, 14 Oct 2008 11:30:44 -0400

The Washington Post has an amazing article today about employees at Indian call centers, who, thanks to their discussions with indebted Americans, are getting an unusually intimate look at the repercussions of the credit crisis on what John McCain and Barack Obama gratingly refer to as Main Street America.

According to reporter Emily Wax:

Few places in India absorb and imitate American culture as much as call centers, where ambitious young Indians with fake American...

Barclays, Citigroup Beat The Clock on Stadiums

Tue, 14 Oct 2008 10:54:34 -0400

Sports are feeling the chill of the financial crisis, according to this morning's Wall Street Journal. That includes plans for the new Mets and Nets arenas in Queens and Brooklyn, respectively. Looks like their namesakes just beat the clock!

Within the past two years, Citigroup Inc. and Barclays PLC have signed deals to spend more than $300 million over the next 20 years to put their names on sports venues in New York...

It Begins...

Mon, 13 Oct 2008 16:35:34 -0400

"A French colleague who spends a lot of time in NYC just backed out of a condo deal." ["Mighty Euro Tumbles to 16-Month Low Against Mighty...

Welcome, Post-Bubble Prices! Sporty Sixx House Down to $13.95 M.

Mon, 13 Oct 2008 12:53:32 -0400

Way back in April, Cortney and Robert Novogratz, who renovate and sell hip houses under the name Sixx Design (they wrote the book, or at least a book, on "downtown chic"), put 5 Centre Market Place on the market for $18 million. Yet, in 2004, they had bought the place for only $1.512 million, less than a 10th of their asking price. The bubble was such an ambitious time!

Things have changed. After a...

Mighty Euro Tumbles to 16-Month Low Against Dollar

Mon, 13 Oct 2008 10:49:28 -0400

The euro tumbled to a 16-month low against the dollar on Friday, dropping to $1.3258, compared to a record high of $1.60 as recently as July. While this might be good news for New Yorkers tired of the tourist clog, the euro's slide could be particularly bad news for a Manhattan housing market that until recently relied on foreigners for up to one-third of its new-condo buyers.

If the Western Europeans (including the British, whose...

Book Retailers Score Off Financial Crisis

Mon, 13 Oct 2008 10:25:40 -0400

Book retailers, including Borders and Barnes & Noble, are pumping up financial advice books, often displaying the titles in store windows and at key points around the selling floor. From the Wall Street Journal this morning:

"It's been a hot category since the crisis first hit," said Michael D'Agostini, [Borders'] business-book buyer. "We are reordering more in order to keep up with -- and get ahead of -- the demand."

Barnes & Noble Inc., the nation's...

The Local: Shrinks Anticipate Expansion

Sun, 12 Oct 2008 19:12:15 -0400

One of the inadvertent beneficiaries of the Wall Street meltdown may be the city’s mental health professionals. Many of them said their practices have either grown or stayed stable over the past year, as the economy worsened and the conditions that spawned Wall Street's meltdown coalesced.

They believe, grimly enough, their business will only boom as the bust reverberates.

"This is multi-level stress in that it is financial,...

Barclays Axes Mark Walsh, Lehman's Fallen Commercial Real Estate King

Fri, 10 Oct 2008 16:11:53 -0400

Barclays Capital has fired Mark Walsh, the man in charge of Lehman Brothers' commercial real estate investments, along with nearly all the rest of Lehman's commercial-mortgage-backed securities team, according to the trade mag Commercial Mortgage Alert.

Mr. Walsh has often been described as the "man behind the curtain" who made Lehman Brothers loads of money during the heyday of the CMBS market, but also as a man who took far too many risks and ultimately...

Massey Knakal Cuts Jobs; Says It's Got Nothing To Do With Crisis

Fri, 10 Oct 2008 12:09:57 -0400

Mid-market brokerage Massey Knakal has cut its team of brokers from 63 to 46, according to The Real Deal:

"The latest round of cuts was last month. Compared to the start of the year, the number of agents in Brooklyn and Staten Island has dropped to 14 from 21; and Queens and Nassau has declined from 15 to eight, Massey said. Manhattan, the Bronx and Westchester has fallen by three to 24 brokers."...

Fox Business Network Targets CNBC's Jim Cramer in Financial Crisis Ads

Fri, 10 Oct 2008 11:41:02 -0400

According to recent articles, the Fox Business Network (FBN) still lags far, far behind its competitors at CNBC in terms of the size of its audience.

But amid the current financial panic, FBN is hoping to win over some viewers by running a political-style attack-ad knocking the record of CNBC's Jim Cramer.

"Financially, these are crazy times," warns a scary voiceover in the ads. "The last thing you need is bad advice....

What Happens When Gentrification Rolls Back

Fri, 10 Oct 2008 08:16:34 -0400

When Gib Veconi moved to Prospect Heights in 1991, he and his neighbors spent years renovating brownstones. They started with garden-level apartments, and finished each successive story with rental income earned from the ground-floor tenants.

"No one could imagine tearing down a historic building," he said. "It was a question of economics." They couldn't afford the demolition.

Mr. Veconi, the chairman of the Prospect Heights Neighborhood...

Too Soon

Thu, 09 Oct 2008 16:40:04 -0400

Didja hear the news? The Dow Jones industrial average just fell below 9,000. If it keeps sliding, young people in the U.S. might find themselves the new Generation X—you know, those early '90s coffeehouse denizens whom we were repeatedly told were "the first generation that may end up worse off than their parents."

Gen-X is clearly on the minds of the folks at Hulu.com, NBC Universal and News Corp's video site. How else...

Best. Retail. News. Lead. Ever.

Thu, 09 Oct 2008 10:51:52 -0400

Forget Charles Dickens. For America's retailers, it's looking more like a Charles Darwin...