Monday, March 24, 2008


I spent today going through the business plans of bond insurers - for profit (well, a paycheck) rather than fun. So I didn't have time to go through the State funding agreement for the Atlantic Yards project. Well, early bird, and all that, because Norman Oder got the most interesting news out of the agreement, which was that there is a deadline for the developer to get his buildings up, but it's pretty lenient, and the clock doesn't appear to start ticking till the project reaches financial close.

The remaining details, of what exactly the state and developer are on the hook for, are pretty well-known to the Atlantic Yarderati. This agreement did not cover the overall financing of the project, and the spaces where the project costs would go have been left blank, probably because they haven't been settled yet. My interest was briefly roused by the guarantee agreement from Forest City Ratner's corporate parent, Forest City Enterprises, to the state, but this seems to just cover the phase one infrastructure, rather than the stadium or anything else at the site.

Quick note from Mrs. Cutesome, who has a lovely eye for matters legal (well, a lovely everything), but less interest than I in spending a Sunday going through funding agreements. Quite a few of the subclauses in the agreement have been struck out, with only [intentionally deleted] remaining to let us know they were ever there. According to her, any decent law firm would have moved the clauses up to replace the deleted ones, and gone through the rest of the document making damn sure the loose ends were tied up. And who were the city and state using for the work? Only top Wall Street law firms Skadden Arps and Fried Frank. Poor show, chaps. Still, if you can't trust Wachtell Lipton not to bodge the bank rescue of the decade who can you trust?

Still, I didn't mean to obsess about the arena today. I was much more perturbed by the sight of our useless gutless ward-heeler of a Borough President Marty Markowitz on the TV this morning. And he wasn't propping up a spurious news item, either. No, he was in a commercial.

The commercial was for the Dine In Brooklyn festival, which starts this week. It's actually one of the few initiatives of his for which I hope he does not endure time in purgatory, even if it is stolen from a more comprehensive, and better-supported Manhattan version. Neighborhood standards are more evident than the newer restaurants, but it's still a good way to sample some new places. It's on this week.

But why, in the name of crap did Markowitz decide to spend someone's money on low-budget and unappealing commercials featuring his leaden delivery and sh1t-eating grin? Oh, wait, I know why, it's because it's a little over a year before the democrats decide which eminently forgettable functionary they put up against the republicans. Markowitz figures a few cut-priced slots might put him over the top.

Where have we seen this before? Oh that's right, those NY tourism adverts that ex-governor Pataki made but which seemed to enjoy suspiciously heavy play within the state. California, at least, has a celebrity for a governor, and seems to be prepared to spend money where the tourists might be.

Markowitz already has form in less-than-clean fundraising practices. Good to see he's also working on the dubious campaign expenditures angle too.

Sunday, March 23, 2008

On Gesture Politics

As promised, a quick look at Ed Koch and his new book, The Koch Papers: My Fight Against Anti-Semitism. I can't recommend this book as highly, because I haven't read it, though I think it would give you a couple of interesting insights into US policy towards Israel in the 1970s and 1980s.

The book's most interesting tidbit, at least according to the talk between Koch and his editor, Rafael Medoff, at the Princeton Club on Wednesday, is that his source for the news that James Baker had uttered the phrase "F*** the Jews. They didn't vote for us anyway" was Jack Kemp, say the authors. And Koch is plenty exercised that neither Baker, nor his boss, George Bush the First, were not more upfront about what happened.*

Koch was in a mood to settle scores. He was graceful about Bush Senior, who allowed Koch to reprint a letter about the affair that does not reflect completely well on him. He described Woody Allen's refusal to let him reprint a letter, where Allen acknowledges that anti-Semitism might have a following in France, as "despicable" (you can read an exchange between the two here). Not the sleeping with the step daughter bit, which took place a year or two after Koch appeared in one of his films. Just so it's clear.

We also got Koch's thoughts on the Jeremiah Wright flap. You've probably read all about the thoughtful and well-reasoned speech from Obama on his relationship with Wright, and the how relations between African-Americans and Whites have to be viewed through decades of history. As part of it, Obama compared, and didn't quite make equivalent, the thoughts of Wright on America (short version: given America's lousy foreign policy and race record I say God Damn America) and his white grandmother's fear of black teenagers on the street.

As far as Koch is concerned, the more important equivalency is between Obama's grandmother and Jesse Jackson, who voiced similar sentiments in the 1980s, and thus blessed fear of young black males during the 80s. Which gives you an idea of Koch's worldview - public consciousness as shaped by a few well-placed leaders.

As far as Koch was concerned, Obama's point, that both Wright's and his grandmother's views (and Jackson's, for that matter) are the product of the difficult co-existence to which America's races have settled down in the years since civil rights, are irrelevant. This is gesture politics as the means and the end. Koch, for instance, talks of his work in allowing men convicted of possession felonies under the Rockefeller drugs laws to overlook them in job applications, and of the damage that the laws have wreaked on families and communities affected by drugs. But he's only really interested in explaining how him and Al Sharpton bonded over the process.

Koch is not just the product of New York City politics, since as his book recounts, he spent a fair amount of time strutting his stuff on the national stage. But the quotable, affable, less-than-managerial Koch was ideally suited to staying on top in City politics. Bloomberg, of course, is pretty much the opposite, while Giuliani, who had an almost pathological addiction to public gestures, no matter how destructive, nonetheless decided to highlight his managerial competence in his mayoral, and later a national, campaigns.

Is Koch history, or a decent guide to what the city's democrats might throw up if left unmolested? I don''t know. But can't you see something of the Koch playbook, minus the sharp one-liners, in Marty Markowitz' inelegant mugging? I'm just sayin'.

*This sentence originally erroneously ascribed the remark to Kemp, rather than named Kemp as Koch's source. Apologies to Kemp, and the authors.

Friday, March 21, 2008

And Then There Was One

Well, it was printed in the Times so it must be true. Bruce Ratner has indicated to that the Atlantic Yards project just consists of a basketball arena, for the time-being. This is stunning. Ratner's expertise lies in building commercial space and then filling it with tenants he recruits through government and society connections. Got that? Ugly offices with public tenants. Not hoops.

What's irritating about the development is that there are very few people that object to some kind of housing being built in that spot. Not Develop Don't Destroy, not ACORE. A lot of us had assumed that the arena was an excuse for Broooooce to build some more of his signature ugly skyscrapers, but the man seems set on going ahead with the arena, with construction set to start by the end of the year.

The reason for the delay is pretty straightforward. The CMBS market has seized up, and construction lenders are reassessing their commitment to speculative office buildings in untried locations (Prospect Heights not being a white-collar hub right now). Actually, the CMBS issue is probably not a factor, since the debt would not be refinanced in that market for a good few years, I'm guessing.

Once we factor in the rumoured difficulties in finding enough tax-exempt capacity for the affordable housing element, and the looming condo glut on Fourth Avenue (I'm not saying it's going to pressure prices, just that there are a hell of a lot of units down here), it's evident that Ratner's crunch-related slowdown is not a head-fake. I guess one way to test this thesis would be to see if Extell's bid is still on the table.

So, where does this leave the arena? I'm glad to be proved right in my (definitely private, possibly public) predictions that the cost of the arena was going to get very close to $1 billion. I'm less happy to learn that Ratner still thinks he can make a go of moving a basketball team to Brooklyn.

The financing picture is beginning to look trickier. First bit of good news for the developer - the bond insurers are still open. The bad news is that they're not that interested right now in the more speculative end of the market (that just above what the agencies describe as speculative grade, and what the rest of us call junk). The ones that are still standing are raking in high premiums for turning silver bonds into gold, rather than bronze into gold, which is a business that is a little more capital intensive.

The alternative would be to turn to the banks to finance the arena, rather than the bond market. They've done this before, but interest on bank loans would not, as far as I know, be exempt from tax. The Times article suggests that if the arena loses its allocation of tax exempt bonds this might push up the "cost" of the arena. This is a little misleading. It won't push up the construction cost of the arena (in fact, banks might demand a less expensive set of insurance contracts for the contractors on the arena), and the upfront fees from banks and Goldman Sachs, as bond underwriter, would not be appreciably different.

But it would increase the debt burden on the project hugely, so much that Ratner, as team owner, would see even less of a return on his investment in the team because he's having to devote a higher proportion of team revenues to servicing the arena debt. I'm doubtful that the arena could go ahead with a bond financing without the bond insurers, unless Goldman can scare up a very highly-rated alternative insurer (Buffett?).

Right now Ratner's sitting on some sites with some serious potential in a gentrifying neighbourhood. Assuming that the area's demographics keep moving in the same direction despite a recession (a big if), he'll eventually see a return, though I can't help but think a Boymelgreen/Newswalk-type job on Ward's Bakery would have made him more money. The arena though is looking edgy. I'm sure he's too discreet to be shopping the team that publicly, but he'd be crazy not to look into it.

Biscuits For Smut

In response to the commenter on the post below who suspected that Horsely could somehow have engineered his own deportation, I bring you this: A NYT story on immigration officials demanding sex for green cards. Like I said, the good news is that immigration officials are very difficult to manipulate, but the bad news is, they are very difficult to manipulate.

Thursday, March 20, 2008

“I’ve got good news and bad news. The good news is, they all know about the book. The bad news is, they all know about the book.”

So, I managed to go from a complete book-launch virgin to a seasoned old hand, and all it took was an evening out in Manhattan. The second launch was at the urging of a friend that handles the author's publicity in the UK, while the first was an initiative of Mrs. Cutesome. I'm going to handle the second one first because the first, a signing event for The Ed Koch Papers sparked a more complicated set of observations.

The second was mostly a chance to drink some alcohol, the more so when it became apparent that the author himself would not be able to make it. This was the US launch of Dandy in The Underworld, the memoir of Sebastian Horsley, reformed addict, unrepentant whoremonger, and possessor of a quite gigantic top hat. As you can read here, here and here, he didn't make it to the party.

Mr. Horsley was apparently traipsing through US immigration with the aforesaid gigantic hat and a needlessly shiny suit when an intrepid member of the US Bureau of Citizenship and Immigration Services asked him what his business in the US would be. They may even have tried to elicit some biographical details from him. The Feds then proceeded to google the fellow.

My first assumption upon hearing that he had been deported from Newark International for "moral turpitude" was that this was a quite awesome hoax, which says something about my respect for the deviousness of his publicity people. My second was that he chose to embellish a more mundane immigration snafu, one that has entrapped even drones such as myself several times before now.

But no. The BCIS decided that confessing to criminal behaviour and whoring, even while not having a criminal record for same, was enough to pitch him back into the welcoming arms of British Airways. I'm still scratching my head as to why the publishers had him fly into Newark. I can't help but think that the boys at JFK would have waved him through, with all the freaky boys from Latin America, in a second. In Jersey, I'm afraid, they find all of this flamboyancy a little distressing.

I have, unfortunately, missed most of the obvious takeaways. Gawker noted that this was a very strange time to be barring a whoring expert from New York, while the New York Times went off on a rather long-winded exploration of how frequently these memoirs tend to be made up (quite a lot as it happens). The Guardian leads with the deportation being a sign of increasing intolerance on the part of the US authorities.

It wasn't. It was a bored and cranky immigration agent. One of the little-understood elements of the US immigration service is how much latitude their agents have in dealing with cases that are presented to them at the window. There is a rulebook for agents to follow, and some days they're into it more hardcore than others. That's about it.

So not that I have an enormous number of parties to compare this one to, except Ed Koch's rantings at the Princeton Club, but this one was OK. I didn't know anyone there, and only talked to the bar staff, a couple of polite but reserved people in the absinthe queue and, very briefly, Horsley's publisher Carrie Kania.

At the party we got a statement from Kania (who is not named, you will not be surprised to learn, after the planetary system from Escape Velocity), which eerily echoed a statement from his UK publishers, and a statement from Horsley, read out by a gentleman called JohnRobert Pereno [thanks, Observer], whose full name I did not catch, and whose identity blogging permits me not to ascertain.

He was backed by a guy who looked a little like a thinner and more grizzled version of Warlock from the Young Ones, who was playing a guitar fashioned from a Castrol GTX tin. The reason for this musical angle is that Horsley named his memoir after T-Rex' last album, a well-regarded 1977 return to form, released a mere six months before singer Marc Bolan's death. The songs were much less immediate than T-Rex early stuff, but the sleeve cover alone makes it clear why Horsley loves the album so much. You can see echoes of it on the cover of the book.

Which doesn't quite explain why Horsley's high representative decided to sing the title over and over in the style of David Bowie. But then I'm just an unpaid, and very bad, fanzine music writer, rather than a publishing type.

Still, I got a free book, and for that alone, and in an attempt to buoy the fortunes of both his publishers, I urge you to buy it. I had a start at reading the book on the subway back, head swimming in cheap pinot (score one, by the way, for Mayor Koch. His booze was fine), and the first forty pages reminded me of nothing so much as a slightly more lurid and histrionic version of Clive James' Unreliable Memoirs.

The style narrowly skirts being epigrammmatic, while Horsley skirts being self-pitying. So far the author's almost self-deprecating, or at least not afraid to highlight his faults, which is not the same thing at all, I suppose. I'm curious enough after the taster to see how the whoring and drugs turns out, although the childhood section sets up the later debasement with an inevitability that Karl Marx, or Edward Gibbon for that matter, would appreciate.

I don't think I'm really that interested in whether Horsley is, in the words of the Telegraph reviewer, a "tosser" or not. I'm not sure Horsely would see it as his life mission to get everyone to like him. I certainly struggle to see what evidence the Telgraph's Roger Lewis has for Horsley being deeply square deep down, apart from wishful thinking. Still, since poor Mr. Lewis manages to muff a biographical detail that appears on page 3, I''m not sure what Horsley's critical reception in the UK has to say to us at all.

Still, Horsley does fascinate us (everyone, apparently, apart from a features editor of my acquaintance, who said "he just sounds British"), and while we may be upset that such a slim resume as Horsley's can account for such attention, there's no doubt that New york would have been a more colourful place with him around.

Tuesday, March 18, 2008

RIPs In the Fabric Of Space Time

Arthur C. Clarke, Anthony Minghella, and Captain Birds Eye. I suspect that dinner at Jesus' gaff will be fun tonight. Except for Clarke denying the proceedings are happening, obviously.

Friday, March 14, 2008

I Might Be Wrong. What Of It?

OK, well maybe Paterson is less inclined to support scammy mega-developments than I'd previously assumed. It looks like we have a genuine foe of eminent domain in the Governor's mansion, just as Spitzer was probably less friendly to the monolines than I'd earlier asserted. But I'll double down my bet here: I still think Atlantic Yards' Brooklyn Democrat/ACORN/dubious grassroots groups/Bloomberg/real estate interests coalition is durable. And I think Paterson, even after passing the budget will have bigger things to take down than Ratner's folly, awful value-for-money though it is.

On another note, did anyone else watch watch top Spitzer-enemy Joe Bruno's solemn "my thoughts are with the family" TV appearance this morning? You know how sometimes people are described as smiling using only their eyes? Yeah, he was doing that.

Bear Depressingly

I'm starting to get really conflicted about this credit meltdown business. On the one hand, boom times for financial services providers essentially underpin my income. On the other hand, I've had such awesomely bad experiences talking to investment bankers, as compared to their clients, that I'm slightly cheered every time one of them inches closer to the abyss. The exception is probably the financial services megastore that holds my money (hint, not the conservative European ones).

Take this morning's developments. Bear Stearns is having appalling problems accessing ready cash, and has just become the recipient of its very own bailout. Am I wondering about the future of intermediaries in credit markets, the similarities to Northern Rock, what this says about the bottom of the market, and the future of the US consumer lifestyle?

No, I'm wandering back to the rudeness of a guy in fixed income in London a year or so back and smiling. God I'm a nasty person. Is there a name for this syndrome? It's fair to say I'm not alone. To take the opposite example, Jim Cramer should, by all accounts, be cheering at the downfall of Wall Street's nemesis, Eliot Spitzer, but he's a friend of the family, and sincerely upset and bewildered by what happened to his buddy.

Who says markets don't run on emotion?

Interesting, amid all the speculation about what will happen to Bear, that there has not been any fresh speculation about who might take it over. Deal Journal had a gander at the question last November, positing that fast-growing hedge funds wanting to expand their infrastructure might take a bite.

Of course, there's always a European or even Gulf bank wanting to make another disastrous US foray. But things are looking so hairy, and so many fingers have been burnt by this mess, it's hard to work out if anyone would be able to close this deal.

Thursday, March 13, 2008

Follow The Money

Hey, my evening just opened up, because the Canadian buggers and their New York-based henchmen have been unable to fix my baby. Unfortunately it will probably be spent buying paint and calling Hong Kong-based CFOs.

Still, I do pause briefly to advert your attention to this from Slate. I always find the recklessly provocative Slate to be a good way of easing myself back into the blogging lark, sort of like digital Radox.

The headline screams "Did Eliot Spitzer get caught because he didn't spend enough on prostitutes?" It's a chance for the writer, sociaologist Sudhir Venkatesh, to revisit his research into the city's sex workers. It's an interesting read, highlighting one of the many weird and wonderful aspects of the Great New York City Clean-Up.

The author looks at the three tiers of home-based high-end sex workers, with the top tier serving essentially as polyamorous mistresses to millionaires. Spitzer, the apparent cheapskate, was stuck in the bottom tier, presumably my virtue of his unwillingness to contribute directly to Ms. Dupre's housing costs.

But it seems to me that the author is buying in to some of the mystique of the high-end prostitution industry, that discretion on the part of the service provider is the key to staying out of trouble:

They're also less likely to be targeted by cops, social workers, or clergy, all of whom work to get street-based prostitutes out of the profession.

Here's the thing. It wasn't the Emperor's Club that got Spitzer into trouble. It was Spitzer's sloshing around vast sums of money to pay for his ho habit. You can check out the timeline at Talking Points Memo.

Now was it the fact that Spitzer was paying so much money to a business rather than an individual that triggered the investigation, or was it the way he tried to stagger the payments? Either way, it seems that the risk was all to Emperor's Club for having such a high-profile client, rather than the other way round. In that respect, having an associate pick up whoever was still hanging around the Holland Tunnel may have been a better strategy.

Fish in a barrel...

In unrelated news, a twisted, rather incoherent, and premature eulogy to Magnetic Field is up at Sugarzine. Written on the plane at the same time as the much-linked earlier Spitzer post.

Wednesday, March 12, 2008

TTFN Eliot

Greetings from Miami, where it's warm, and orange figures in blue blazers stalk the night spots of South Beach. And two beers and a scotch will set you back $38. Ouch.

I've been slipping in and out of a conference yesterday and today, so it was only through the ministrations of the Times-reloading Mrs Cutesome, that I learned of the admission of New York's governor, Eliot Spitzer, that he'd done something, on the same day as prosecutors were letting us know they had the dirt on Spitzer's visit to Ladies of the Night.

I ain't gonna say I'm not disappointed. More than a few people have noted that Spitzer was one of that small number of people (as opposed to events) that frightened Wall Street people, and anyone who's experienced the sharp end of financial types' hubris couldn't help but cheer him on.

Then there is my nagging sense that he was the last great hope of reformers to Albany, New York's funny-looking and disfunctional state capital. If you were perplexed at the iron grip that Shelly Silver (D-Downtown pork) and Joe Bruno (R-Upstate Pork) held on state government, the prospect of Spitzer, in his arrogant and inelegant way, threatening to upset their cozy existence was very exciting.

But New York's pool of dynamic political talent is shallow, as evidenced by Marty Markowitz leading the pack of Democratic mayoral contenders. It's with not a little sadness that I suspect that we won't see the like of the chinny little whore-hopper again.

So what happens to two of my obsessions: bond insurers and the Atlantic Yards project? Well, Mr Norman Oder has done the most dignified attempt to discuss what happens to the Ratner boondoggle. Short answer is: no idea.

Ratner's development plan was a text-book example of how to exploit political inertia, with a secretive approvals process, targeted panders and fake grassroots support. Spitzer, in theory, could have upset that, though the evidence is that AY was not a huge concern of his. It was, after all, real estate money that gave Spitzer his taste for the high life.

Unless Spitzer's replacement turns out to have the animus and personality to take down the cozy consensus around the project, or Letitia James gets appointed Tyrant of Brooklyn (Tish the Tyrant! Give Me Liberty or Give Me Tish!), I can't see how much a political solution can accomplish right now. It's easy to criticize the AY opponents for taking a judicial approach to challenging the project, rather than becoming more active politically. But the lack of attention to the project following the ascent of self-styled reformer Spitzer to the governorship shows how unlikely a politically-driven shift is.

The bond insurers is another issue. It's interesting to note that when Spitzer was dallying with courtesans at the Mayflower hotel in DC, he was in town to testify about bond insurance. Spitzer's attempt to refloat the bond insurers can be viewed as one of several attempts to make nice with the financial services industry. A couple of short-sellers aside, most of Wall Street has an interest in keeping the monolines, a reliable conduit to the pockets of retail investors, open for business,

It's not as if Spitzer's departure is likely to end efforts to rescue the bond insurers, and it could be that the role of New York state's government in the effort has already been superceded. But while the Spitzer/Dinallo wrangling was designed to deal with continuing issuer access to market rather than protect investors, stabilising the market is an area where the interests of the two coincide.

Leadership of the effort is already shifting, in particular to California. But California has an almost innate distrust of the financial services industry. Any investment banks that are currently cheering the downfall of their nemesis should remember that moment when Bill Lockyer manages to get their monolines dismembered.

I have, it must be said, a truly appalling track record in growing fond of mouthy, hyperkinetic pols that flame out of office in lurid scandals (see also one McGreevey, James). Spitzer's sex-downfall I will recover from. I can't help but think, though, that the city's moneyed interests will miss having a real estate scion in charge. Anyone with an interest in stopping moneyed vandals from hollowing out neighbourhoods? Not so much.

Monday, March 03, 2008

The Hidden Depths of the Vader Clan

Sorry to come back to the land of the living with such a short and whimsical post, but I hope that a shift to a slightly less punishing schedule will allow me to be a little more consistent in the future. If it's any consolation I haven't done much commenting anywhere, except a few at Market Movers, where I was mostly getting exercised about bond insurers.

Still, one delightful detail jumped out from an article that Mr. Salmon linked to in the Wall Street Journal on sawdust shortages.

"Robert Vader of Fair Grove, Mo., buys scores of bags of fluffy pine shavings a month for his business, called Vader's Bunnies and Pets"

Would you buy a bunny from a man called Vader? I couldn't help but worrying that my bunny would be encouraging me to give into my anger the whole time, and destroying Alderaan (yes, I know, it was Grand Moff Tarkin, but, well, you know). So here's a run down of the Vader clan:

Darth: Sith lord. Dark side practitioner. Destroyer of worlds
Robert: Sells bunnies
Jeff: Well.....