Skip to main content

A tale of regulatory capture involving the New York Fed and Goldman; what about regulatory capture regarding Atlantic Yards?

Since Friday, a huge story has emerged, thanks to a ProPublica article and the radio show This American Life, about "regulatory capture" of the Federal Reserve, which means letting the purportedly regulated business either lead the way and/or have its goals internalized by staff charged with regulating it.

It's an important concept regarding Atlantic Yards/Pacific Park, since evidence of regulatory capture has emerged several times, as I explain below.

The Fed vs. Goldman Sachs

As summarized by Bloomberg View columnist Michael Lewis, in his 9/26/14 column The Secret Goldman Sachs Tapes:
Our financial regulatory system is obviously dysfunctional. But because the subject is so tedious, and the details so complicated, the public doesn't pay it much attention.
That may very well change today, for today -- Friday, Sept. 26 --- the radio program "This American Life" will air a jaw-dropping storyabout Wall Street regulation, and the public will have no trouble at all understanding it.
The reporter, Jake Bernstein, has obtained 46 hours of tape recordings, made secretly by a Federal Reserve employee, of conversations within the Fed, and between the Fed and Goldman Sachs. The Ray Rice video for the financial sector has arrived.
After an internal study noted failures in regulation, the Fed hired new regulators, including "a strong-willed, independent-minded woman named Carmen Segarra," who was assigned to regulate Goldman Sachs and stationed at that office. But Segarra was surprised how much Fed employees deferred to Goldman, and alarmed by the internal pushback to her questions that she began to record her meetings, until she was fired.

More from the ProPublica article, Inside the New York Fed: Secret Recordings and a Culture Clash
In a tense, 40-minute meeting recorded the week before she was fired, Segarra's boss repeatedly tries to persuade her to change her conclusion that Goldman was missing a policy to handle conflicts of interest. Segarra offered to review her evidence with higher-ups and told her boss she would accept being overruled once her findings were submitted. It wasn't enough.
"Why do you have to say there's no policy?" her boss said near the end of the grueling session.
"Professionally," Segarra responded, "I cannot agree."
The New York Fed disputes Segarra's claim that she was fired in retaliation.
Note that, as the Fed defended itself, Massachusetts Senator Elizabeth Warren called for congressional hearings on the issue of deference. (There's been no coverage in the Times, and brief mentions in the New York Post, New York Daily News, and Wall Street Journal.)

Regulatory capture in New York State: EB-5

Empire State Development, the state agency overseeing/shepherding Atlantic Yards, has certainly demonstrated periodic if not total evidence of regulatory capture.

It has deferred to Forest City, in small ways, such as forwarding Construction Alerts prepared by the developer without vetting, and sometimes in much larger ways.
Davidson presents an ESD  proclamation to a migration firm

Consider the decision, approved by then-Governor David Paterson, to send ESD official Peter Davidson to China in 2010, helping Forest City Ratner get a low-interest loan under the EB-5 program for immigrant investors.

Davidson, at the request of the private firm packaging the EB-5 investment, prepared vaguely worded proclamations saluting the Chinese immigration brokers--private, profit-making firms--key to the process.

The low-interest loan saved perhaps more than $100 million on conventional financing. The state asked for nothing in return.

Meanwhile, however legal, the fundraising didn't create new jobs--the purported justification for giving investors green cards--and thus subverted the mission of the EB-5 program.

As EB-5 analyst Michael Gibson told Business Week, when a project “substitutes EB-5 capital for more expensive bank financing or bond funding or even equity, that isn’t really creating new economic activity. It’s margin for the developer.”

The cover-up of a falsification

As I wrote 7/25/12, documents suggest the agency and its environmental monitor, Henningson, Durham & Richardson (HDR), condoned a cover-up of a Forest City contractor's falsification.

Forest City was supposed to hire its own On-Site Environmental Monitor, meeting daily with contractors and observing site conditions. But the developer dragged its feet.

"During the second quarter of 2010, HDR expressed concerns with lack of oversight," a report stated. "Chuck Baldwin of Turner Construction was hired to handle the position until mid-July and HDR noted an improvement in on-site compliance."

However, that compliance relied on a wink and a nod, according to documents I discovered.

Each week, HDR compiles an "Atlantic Yards Field Inspection Report" for ESD. According to the non-public draft of the 5/20/10 report, monitor Baldwin passed on to HDR sobering information: five pieces of heavy equipment lacked the required diesel particulate filter, aimed to reduce asthma-causing exhaust.
Draft report
HDR "asked Chuck if FCRC has been keeping daily inspection reports for each piece of heavy machinery," according to the draft report. "He stated that while they have been maintaining this documentation, it had been falsified by the contractor."

Baldwin told HDR a corrective action plan was requested from Hunt Construction, though no penalties were mentioned; in turn, HDR planned to talk with Forest City.

That damaging admission vanished from the final Field Inspection Report made available to the public.
Final report, edited
Someone working at or for ESD apparently condoned that.

Who's "we"?

Barclays Center transportation consultant Sam Schwartz, shortly after the arena opened, told Transportation Nation:
“As the herd of pedestrians comes out, we shut down Atlantic Avenue for cars and get the people across the street for about ten minutes and then we let the cars flow,” Schwartz said. “It hasn’t backed up traffic much.”
His use of "we" seemed a bit off. Schwartz was a consultant, no longer a city official. The Department of Transportation and/or New York Police Department were in charge.

Paying for police

At a June 2012 community meeting, Community Board 2 Chairman John Dew, noting announced plans to bolster security both with off-duty law enforcement officers (aka “paid duty”) as well as an increased police presence, asked who’d pay for the latter.

A Forest City staffer, a former cop, noted that, as with any large-scale event, police officers would be moved.

“I think we all know that, but this takes from resources,” Dew pressed on. “In this particular instance, is there an opportunity to bill back to Forest City Ratner?”

“The answer is no,” replied Forest City Ratner's Ashley Cotton, taking the question, though there were city police and special projects officials in the room. Just as with new housing being built on Flatbush Avenue, said Cotton, a former city official, “the city has to adjust... The arena is not alone in adding new work to the city.”

Bass escaping from the arena

I reported 10/17/12 on a community meeting regarding operations of the arena, which had been open for some three weeks.

Responding to reports of arena neighbors feeling bass from the Jay-Z concert on their apartments and in the streets, Geraldine Kelpin of the Department of Environmental Protection said, “we did hear, on the street, sound from the concert... we're somewhat perplexed.”

She said DEP “staff did go to someone's apartment... we heard it, but it wasn't a violation.”

Resident Wayne Bailey, who said he was present when the noise was measured at Newswalk, offered a contrary account: “they didn't measure when the concert was playing.”

Jim Vogel, a resident of Pacific Street east of Fourth Avenue, said, “I live a block away... my windows were throbbing.” He went on to question whether the arena was sufficiently soundproofed.

“Thank you, Geri,” concluded Arana Hankin, then Director, Atlantic Yards Project, for ESD. “I’m confident that the work they’ve done was sufficient to date."

Except it wasn't. Now Greenland Forest City Partners are planning a green roof that will, in part, tamp down escaping noise.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Atlantic Yards/Pacific Park graphic: what's built/what might be coming + FAQ (post-dated pinned post)

This graphic, posted in February 2018, is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. Note the unbuilt B1 and the proposed--but not yet approved--shift in bulk to the unbuilt Site 5.

The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change. The project is already well behind that tentative timetable.

How many people are expected?

Atlantic Yards/Pacific Park has a projected 6,430 apartments housing 2.1 persons per unit (as per Chapter 4 of the 2006 Final Environmental Impact Statement), which would mean 13,503 new residents, with 1,890 among them in low-income affordable rentals, and 2,835 in moderate- and middle-income affordable rentals.

That leaves 8,778 people in market-rate rentals and condos, though let's call it 8,358 after subtracting 420 who may live in 200 promised below-market condos. So that's 5,145 in below-market units, though many of them won…

The passing of David Sheets, Dean Street renter, former Freddy's bartender, eminent domain plaintiff, and singular personality

David Sheets, longtime Dean Street renter, Freddy's bartender, eminent domain plaintiff, and singular personality, died 1/17/18 in HCA Greenview Hospital in Bowling Green, KY. He was 56.

There are obituary notices in the Bowling Green Daily News and the Wichita Eagle, which state:
He was born in Wichita, KS where he attended public Schools and Wichita State University. He lived for many years in Brooklyn, NY, and was employed as a legal assistant. David's hobby was cartography and had an avid interest in Mass Transit Systems of the world. David was predeceased by his father, Kenneth E. Sheets. He is survived by his mother, Wilma Smith, step-brother, Billy Ray Smith and his wife, Jane all of Bowling Green; step-sister, Ellen Smith Alexander and her husband, Jerry of Bella Vista, AR; several cousins and step-nieces and step-nephews also survive. Memorial Services will be on Monday, January 22, 2018 at 1:00 pm with visitation from 10:00 am to 1:00 pm Monday at Johnson-Vaughn-Phe…

Some skepticism on Belmont hockey deal: lease value seems far below Aqueduct racino; unclear (but large?) cost for LIRR service

As I wrote for The Bridge 12/20/1, The Islanders Say Bye to Brooklyn, But Where Next?, the press conference announcing a new arena at Belmont Park for the New York Islanders was "long on pomp... but short on specifics."

Notably, a lease valued at $40 million "upfront to lease up to 43 acres over 49 years... seems like a good deal on rent for the state-controlled property." Also, the Long Island Rail Road will expand service to Belmont.

That indicates public support for an arena widely described as "privately financed," but how much? We don't know yet, but some more details--or at least questions--have emerged.

An Aqueduct comparable?

Well, we don't know what the other bid was, and there aren't exactly parcels that large offering direct comparables.

But consider: Genting New York LLC in September 2010 was granted a franchise to operate a video lottery terminal under a 30 year lease on 67 acres at Aqueduct Park (as noted by Gov. Andrew Cuomo).

As…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…