Monday, September 22, 2008

Down the Tubes

The talking heads tell us that a new Great Depression is not in the offing.  Hooray!  That said, it is certain that the end of American investment banking will reshape the US economy, and devastate ours here in the Minor Outlying Islands.

When Morgan Stanley and Goldman, Sachs, sought and received permission to transform themselves from investment banks into commercial bank holding companies -- what most of us actually mean by the word "bank" -- it marked "the end of Wall Street as we know it", in the words of former FDIC head William Isaacs.  And Wall Street has long been an enormous part of life in the Big Apple -- the engine behind our service industries, real estate market, law firms, even our museums and theatres.

We have lost an entire American industry here.  This is no less shocking than if Ford, Chrysler and GM shut their doors within weeks of each other, or announced plans to make asphalt shingle instead of automobiles.  Actually, it is more shocking, since the US auto industry has been shriveling for decades, while even a few months ago, these investment bankers still seemed like (in an old phrase) "Masters of the Universe."

Right now, in the midst of it all, nobody knows how severe the local repercussions will get.  It is likely that as philanthropic donations taper off, our massive arts institutions -- Lincoln Center, the Metropolitan Museum -- will take a big hit, right up front, buffered only by what we hope are significant endowments.  But after that?  How many buildings under construction will be abandoned halfway up, as the funding disappears?  As the city and state tax bases change, what will happen to our already-ailing mass transit system?  Eventually, as public services diminish and the job market constricts, crime will begin to edge back up again.

We're not talking apocalyptic dystopia, mind you.  New York was an interesting place to live in the 1930s, and in the 1970s; it will still be an interesting place to live if the money drains out again. But it may be a poorer, dirtier, and more violent place. 

All that said, we are a bit concerned by John McCain's apparent lack of economic savvy.  Not only does he think the "fundamentals are sound," but he has, just recently, suggested that as president he would "fire" the head of the SEC, something the president does not have the power to do, and apparently confused the SEC with the FEC, or Federal Elections Committee.  Oh, and in a single day he reversed course on the AIG bailout, apparently because he didn't understand what it was.  It's all a bit unnerving, don't you think?


Anonymous said...

"unnerving" is almost an understatement. between john mccain's lack of economic savvy and his running mate"s insight into russia (her neighbor across the strait) it looks as if we are on a downward trajectory resembling an episode of gilligan's island.

Anonymous said...

Even more reassuring to me was his campaign's chief operating officer's comment that "[the NY Times] not today by any standard a journalistic organization. It is a pro-Obama organization that every day attacks Senator McCain... and excuses Senator Obama." Yeah, ok buddy. Call her biased if you will, but not a journalistic organization? It doesn't seem that this campaign could get any further removed from reality than it already is. But there's still time.