Why is the ESDC's Peter Davidson going to China? Could it be "agency capture"? Or maybe a hostage situation?
Davidson surely doesn't believe the effort would directly create nearly 7700 jobs.
And while there may be a document that asserts the investment would help create jobs indirectly or preserve them, we haven't seen the calculations.
It strains credulity to attach the railyard investment to the already-funded arena, or to claim that it ensures future jobs that would also depend on housing bonds.
Perhaps this is an example of the concept of "agency capture," which, as stated in the Encyclopedia of White-Collar and Corporate Crime, occurs when "regulatory agency officials with a pro-industry bias are appointed... and when various forms of inducement or influence, political or psychological, are evident."
The book Understanding Corporate Criminality adds this helpful gloss:
Wilson (1980) suggests agency capture will most likely occur where the regulatory issues at stake are crucial to the target industry, but not to opposing organized forces, or where such forces are absent.It's quite crucial to the target industry--Forest City Ratner via its New York City Regional Center associate--to get no-cost or low-cost financing.
But few people--and even fewer public officials, it seems--think it's crucial to keep the Empire State Development Corporation honest and aboveboard in its transactions. There's no constituency for that.
A hostage situation?
Another way to look at it: Forest City Ratner has the state over a barrel--remember the Beekman Tower renegotiation with unions?--and the state will do what it takes to make sure the project moves forward and delivers some of the promised benefits.
One way to do that, of course, would be to write contractual terms that truly enforce deadlines. But the Development Agreement is quite gentle, for example imposing penalties only if the third tower (of 16 planned) isn't started in ten years.
So if there are no sticks, there must be carrots. The ESDC doesn't have any more money to give Forest City Ratner. But it will apparently do what it takes to help the developer get money from green card-seeking Chinese millionaires.
Noticing New York blogger Michael D.D. White offers a warning:
(*Having just come from seeing Inside Job the documentary dissecting the recent U.S. financial crisis, we note that its prologue informs you that one of the last roles performed by Icelandic government officials before that country’s major economic crisis was to travel abroad shilling for the banks that ushered in the their economy’s ruin.)