Governor Andrew Cuomo’s austerity budget has won the backing of a coalition of business interests named the “Committee to Save New York,” which LittleSis analysts have been researching as part of our Cuomo Watch investigation. Together, we have put together the beginnings of a portrait of the Committee to Save New York, class of 2011. Click through for the full-size image:
The class portrait includes Committee to Save New York board members as well as the directors of three business associations tightly linked to the Committee: the Real Estate Board of New York (REBNY), a coalition of real estate developers and owners; the Partnership for New York City (“the Partnership”), which was formed out of a merger of the city’s longtime chamber of commerce and an elite business association founded by Chase Manhattan chair David Rockefeller in 1979; and the Business Council of New York State, the voice of (big) business in state affairs.
Kathryn Wylde, the CEO of the Partnership for New York City, was widely reported to be at the center of efforts to organize the Committee, perhaps more than any other individual. She and the Partnership convened a sort of early precursor to the Committee, a September 2009 business summit on budget issues that was held in the offices of JPMorgan Chase, with CEO Jamie Dimon, a Partnership board member, playing host. That year the group, according to Wylde, settled on pushing a “constructively anti-tax” message in response to the state’s budget ills.
Financial and business elites like Dimon had reason to be anxious about budget and taxation issues at the time. Earlier in the year, shortly on the heels of the financial crisis, Albany had passed a “millionaire’s tax” on high income earners. The New York Times called it a sign of a “new balance of power” in Albany that favored Democrats, unions, and liberal groups. Working Families Party chair Dan Cantor declared that “the era of phony prosperity has ended.” The tax spurred Paychex founder Tom Golisano to leave the state in an act of billionaire protest.
Wylde’s work to organize the Committee to Save New York in the past several months is a more sophisticated form of billionaire protest, but a billionaire protest just the same: the Partnership’s board boasts 11 members of Forbes’ list of the Richest 400 Americans in 2010, more than any other organization in LittleSis.org’s database. Among them are John Paulson, the hedge fund manager who reaped billions by setting up faulty subprime securities in partnership with Goldman Sachs; Stephen Schwarzman, CEO of the Blackstone Group, who famously threw a lavish 60th birthday party for himself shortly before the financial crisis; buyout king Henry Kravis; News Corp CEO Rupert Murdoch; real estate magnate Jerry Speyer; and, of course Rockefeller himself. (the full list is here)
Big bank CEOs like Citigroup’s Vikram Pandit, Goldman Sachs’ Lloyd Blankfein, and Dimon are the billionaires’ junior partners on the Partnership’s board, worth piddling hundreds of millions. Roughly half the CEOs on the board are employed in the finance, insurance, and real estate sector (FIRE), or as accessories to FIRE in the accounting and law professions, reflecting the mix – or lack thereof – of New York City’s economy.
In other words, the Partnership’s board is packed with wealthy individuals who made their money through the kind of highly-leveraged financial speculation that crashed the economy in 2008 and caused the current budget and unemployment crisis. In advocating for spending cuts over taxation as the way to resolve the budget crisis, Wylde, the Committee, and Cuomo – who wants to let 2009’s millionaire tax expire, in spite of its popularity – are protecting this immense wealth and power.
Wylde performs a similar function as a board member of the New York Federal Reserve, which has extended hundreds of billions of dollars in bailouts to the financial firms that employ Wylde at the Partnership (Wylde joined the board in mid-2009, after the worst of the crisis had passed, but at a time when several large firms still required aid). Several other Partnership directors hold top leadership positions at the New York Fed, including Dimon and James Tisch of Loews Corp, both board members, and William Dudley, the president, who is an ex officio member of the Partnership’s board and a former Goldman Sachs executive.
The New York Fed – and its shadow NGO, the Partnership – exemplifies the “Committee” model of governance: a small group of crony capitalists, impervious to the influence of the electorate, looking out for each other and disregarding the consequences for everyone else. The Committee to Save New York is a clear attempt to bring this style of governance to the state budget process, and it is highly reminiscent of an earlier committee, appointed by Governor Hugh Carey to resolve New York City’s fiscal crisis in 1975. This appears to be by design.
That committee was composed of bankers and businessmen, led by investment banker Felix Rohatyn – now the honorary chair of the Committee to Save New York – with David Rockefeller and several other bankers acting as informal advisers. Less than a year after they came together, the New York Magazine declared that nothing less than a “bloodless revolution” had occurred, and that the “city is now being governed by a committee.” The committee successfully pushed for major concessions from labor unions, layoffs, and reforms targeting social spending, such as free tuition at City College.
Rohatyn has hailed that coalition’s breadth due to the involvement of labor unions, but it is clear that his labor allies were playing second fiddle to the banks, their leadership confused and possibly coopted. It is, perhaps, illuminating that Rohatyn would hire the son of his strongest labor ally, DC 37 head Victor Gotbaum, to work as a banker at Lazard in 1981.
The 1970s kicked off a new era of major subsidies for big businesses in New York City, where large, profitable companies were granted generous tax breaks in return for staying in the city. The second major force behind the Committee to Save New York, the Real Estate Board of New York, has benefited tremendously from this system. REBNY, as it is called, is an association of New York City real estate firms, including most of the city’s top developers and real estate owners. Subsidies to the city’s large tenants naturally get passed through to the city’s large landlords. This dynamic is an important part of the close relationship between the big business interests represented by the Partnership and the big developers represented by REBNY (the organizations share five board members). And with five billionaires on its board, REBNY has a great deal of wealth to protect from taxation.
Press reports on the Committee’s origins frequently credit REBNY’s chair, Mary Ann Tighe of CB Richard Ellis, president, Steven Spinola, and executive committee member, Rob Speyer, as key players in the founding of the Committee to Save New York, and all have joined the board. Speyer’s firm, Tishman Speyer, also reportedly put up $1 million to fund the Committee.
Also funding the Committee is the Durst Organization, run by REBNY board member Douglas D Durst, which obtained $650 million in tax-exempt “liberty bonds” to erect the Bank of America tower on Bryant Park in 2003. This is just one example of many large public expenditures that have subsidized the fortunes of REBNY and Partnership members and other large businesses. Wylde and REBNY board member Mario Palumbo both sit on the board of the New York City Economic Development Corporation, which oversees (committee-style) elements of this system of corporate subsidies.
The economic development model that came to dominate during the 1970s – tax breaks for big businesses, rather than public investment in infrastructure and services – is still in full force, and there are no signs that it will change during the Cuomo administration. The Governor recently nominated Ken Adams, head of the Business Council of New York State, to lead the Empire State Development Corporation, the state’s main economic development arm. Adams was reported to have played a leading role in forming the Committee, but has stepped down due to his nomination as ESDC president and CEO. The Business Council’s board includes representatives of many large businesses upstate, but also has significant overlap with the Partnership (if not REBNY): five members of its board sit on the Partnership’s board, including its chair, Con Edison CEO Kevin Burke. The Business Council has been a leader in pushing for the current model: tax breaks for big business, at the expense of everyone else.
The portrait could be expanded to include more peripheral players on the Committee – regional chambers or the New York City building trades – but most of the key characters are there. It is important to look at the power structure behind the Committee, and not just the named affiliates. If you just looked at Wylde, you might miss the bankers that employ her; if you focused on La Barbera, you’d miss the elite group of business leaders that form the Committee’s core of support.
From the larger portrait, a composite sketch of New York State’s austerity advocate emerges: immensely wealthy, with vast personal riches to protect from politicians and the public; responsible for crashing the economy through speculative and fraudulent investment practices; bailed out, or in charge of the bailouts, or possibly both; insatiably hungry for tax breaks and public dollars; and reigning over New York State politics since the 1970s, when a self-appointed committee ushered in an era of financialization and growing inequality in New York’s economy.
Common sense would dictate opposition to any economic platform that finds its most fervent support from this sort of individual, and would instead target their subsidies, tax breaks, and bailout-generated wealth in order to raise revenue to fund the budget. But Governor Cuomo has joined hands with the austerity committee, issuing a budget that pairs tax cuts for millionaires with budget cuts for college students, schoolchildren, veterans, the elderly, and the homeless. The press and the power elite have settled on a public enemy number one: the public employee. And everything seems to be falling into place for the austerity committee, which plans to spend millions in support of budget cuts.
But they are still in an insecure position, as they were in 2009 when Wylde convened that anti-tax summit at JPMorgan: they are sitting on publicly-subsidized riches that could really save New York. Will New York realize?