Get the money now, Bill Clinton is chanting into a microphone, sermonizing before a parish of pin-striped suits. “Get the money now.”
It’s one of those strange-bedfellows moments that would have been impossible before September 11. Here is a Democratic politician of some distinction from Arkansas sharing the stage in Citigroup’s packed Park Avenue auditorium with some of the city’s top business leaders – megadeveloper Jerry Speyer, billionaire financier Henry Kravis, real-estate baron and publisher Mort Zuckerman, AT&T chairman Mike Armstrong, Lehman Brothers chairman Dick Fuld – and Clinton has turned the event into a gray-flannel revival meeting. Looking on from the audience like proud parents are Hillary Clinton and Chuck Schumer, along with George Pataki’s economic czar, Charles Gargano, and union chieftains Brian McLaughlin and Randi Weingarten. It’s a wildly disparate group, labor and capital, liberal and conservative, yet everyone seems to be following the same hymnal.
The New York City Partnership, a group of civic-minded business leaders that’s hosting the meeting, is presenting an early peek at its economic survey of post?September 11 New York. It’s a study the size of two phone books that recommends ways to support Wall Street right now, in its time of need, while building a more nimble and diverse economy for the future.
The Partnership is lobbying to ensure Congress signs over the $20 billion George Bush promised New York in the wake of the attack, plus a $5 billion package of tax breaks for lower Manhattan. Numbers like that can get most anyone on Wall Street excited, and Hillary’s husband wastes no time pushing that button.
“Get the money now,” Clinton repeats in his folksiest drawl. The terrorists aimed for the World Trade Center because they “think we’re weak and selfish and greedy,” he says, but that’s no reason not to fight hard for that money. Clinton has been to the mountaintop in Washington, of course, and he knows there’s less tax money there than meets the eye. Get it now, he says, because Congress won’t save it for later. His eyes land on Bob Rubin in the first row, near Hillary, and his lip curls into a smile. “Ah see mah Treasury secretary sitting out there, nodding – get the money now.”
Nearly every speaker after Clinton takes this new mantra out for a spin. “To coin a phrase, we need to get the money now,” says Jerry Speyer – a past Partnership chairman who in his working life owns the Chrysler Building and a major interest in Rockefeller Center. The Partnership’s current chairman, KeySpan chief Bob Catell, says it twice. Henry Kravis, who founded the Partnership’s New York City Investment Fund, is more diplomatic but no less urgent: “If we don’t have a public-private dialogue now, we’re going to lose downtown forever.”
For the first time in more than a generation, the city’s business leadership seems united around something other than lowering taxes. “We need to think about the future of a city that’s really been very good to us over the years,” says the last speaker, Citigroup chairman Sandy Weill. “This terrible event really brought us all together.”
During the fiscal crisis of the seventies, David Rockefeller, who was then chairman of Chase Manhattan Bank, marshaled business and labor forces to lobby Washington, fighting the ford to city: drop dead sentiment with one voice. It went so well that in 1979, he founded the New York City Partnership to keep the momentum going. The Partnership promoted economic development, education, and housing, but as the economy recovered, the labor presence diminished, fewer CEOs got involved, and its relevance seemed to fade.
Part of what changed over the past two decades was the kind of businesses that dominated New York. In Rockefeller’s day, the city was the headquarters for 140 Fortune 500 companies; today there are only about 40. Over the years, New York?based bank presidents and industrialists decreased in number, and in their place came men and women from internationally owned financial-services companies. These revolving-door CEOs and global capitalists have fewer ties to the city, though their employees’ salaries still fund a quarter of the city’s tax rolls.
Even before the current crisis, the Partnership was redefining itself. But the trick was convincing a new generation of executives to think about New York. Rockefeller had founded the Partnership after the first fiscal crisis because “there was a feeling that the business world had been asleep at the switch,” says Kathy Wylde, president and CEO of the Partnership. By last spring, that old feeling seemed to be creeping back. “Some of these new business leaders,” she told me then, “are too focused on business.”
“I think it has become increasingly difficult, as people do business all around the globe, to really be a good citizen,” observes Jerry Speyer. “When I was starting out, I was always very impressed with the commitment that the heads of major companies made to the community. My God, the hours that people like that spent were phenomenal. These people are so darn busy now that they have less time than people had in the past. And because they have less time, they’re willing to give less time.”
Speyer launched a search for more activist partners to rekindle the organization. Among those he called on was Henry Kravis, who was looking for a more meaningful way to help the city. “I knew the Partnership, I was on the board, but I told Jerry I was disenchanted with it,” remembers Kravis, founding partner of the leveraged-buyout firm Kohlberg Kravis Roberts (the majority owner of Primedia, New York’s parent company). “They were doing all this lobbying in Albany, but I was looking for tangible evidence of where the Partnership had really made a difference.”
Kravis’s idea was to form a civic-minded venture-capital group to nurture businesses that create jobs in the city, particularly in nascent industries and emerging neighborhoods. The goal was to focus on correcting the city’s overreliance on Wall Street by creating new industries, like biotechnology.
But the events of September 11 created a whole new set of challenges for the Partnership. The Monday after the attack, the group called an emergency breakfast meeting at the Regency Hotel – the birthplace of the famous fiscal-crisis Power Breakfasts that Felix Rohatyn, Lew Rudin, Bob Tisch, and Victor Gotbaum inaugurated in the seventies. (Tisch and his nephew James, the Regency’s owners, were there this time, too, and they picked up the check.) Senators Clinton and Schumer spoke to more than 300 executives about the importance of securing aid from Washington, saying that even with Bush’s support, New York was competing with other interests in Congress. Through Bob Catell, the Partnership had already set up a phone bank at KeySpan for displaced businesses and employees. At this meeting, principals from Skidmore, Owings & Merrill, and Parsons Brinkerhoff started a working group to study infrastructure problems downtown.
The next step was to persuade seven of the nation’s top consulting companies to deliver, free of charge, a damage report for the attack. Kravis was the magnet that attracted pro bono help from such consulting companies as Booz Allen Hamilton, McKinsey & Company, and PricewaterhouseCoopers. “That’s symbolic in so many ways of what the private sector is doing, coming together to make New York City great again,” he says. “These guys’ll probably go back to killing each other when it’s over.”
The report, shepherded by Kravis, puts the price tag of September 11 at $83 billion, assuming the city’s economy rebounds at the same rate as the country’s. The consultants include a plan for saving the financial jobs that remain while slowly weaning the city away from its Wall Street addiction. But the recommendations – a swift rebuilding of downtown’s infrastructure, incentives for corporate retention, bailouts for small businesses, a life raft for retail during the holiday season – aren’t as new or startling as the forces the Partnership has lined up to push them. “I think that we’ve all sort of rallied round the Partnership,” says Dick Grasso, the New York Stock Exchange chairman.
“This is the first time you’ve seen the businesses and unions together like that since the seventies,” Wylde tells me now. “In this kind of crisis, that’s what they’re looking for – what the Partnership was supposed to be. It was Rockefeller’s vision. Now if anything, the crisis is deeper and more compelling.”
Kathy Wylde has a billion-dollar BlackBerry. Her connections in government and the private sector are legendary: In the eighties, as the head of the Partnership’s housing efforts, she won support from hud in Washington and from Albany to build an unprecedented number of affordable homes in New York, mostly financed with billions of dollars from private banks, playing a key role in the Bronx’s revival. Her unflappable, down-to-earth manner masks a savvy core. When I called union leader Dennis Rivera and asked him why he joined this latest lobbying alliance, he said, “We have worked with Kathy in the past on housing. She’s an incredible person, very good at getting people together from labor and business and government.”
If Kravis has helped craft the Partnership’s response, Speyer has emerged as this fiscal crisis’s political-consensus builder – an austere, no-nonsense mogul respected by his peers and well-liked by conservatives and liberals. In the months after the attack, George Pataki proposed a $54 billion relief package so staggeringly wide-ranging that it included a high-speed train to Schenectady. When the White House ignored it, Speyer was there to highlight some of Pataki’s better ideas in a proposal the Partnership was forming with Schumer and Hillary Clinton. “I like to think that I have a relationship with the governor,” Speyer says with typical understatement (in June, he contributed $25,000 to Pataki’s re-election campaign).
Last month, on the Sunday of the memorial service for victims’ families at ground zero, Speyer hosted the governor and both senators at the Partnership’s offices. Together they put the finishing touches on $5 billion in tax incentives for companies that stay in lower Manhattan. And last week, a few days before shuttling to Washington, Mike Bloomberg dropped by Speyer’s offices on Madison Avenue to see an early copy of the economic study. “It’s an easy relationship,” says Wylde. “We speak the same language.”
The mayor-elect, it turns out, has been a Partnership member and a contributor to Kravis’s nonprofit Investment Fund for years. While Rudy Giuliani stormed into office on a mission to tame the unions, Bloomberg is extending them an olive branch – much the same way the Partnership has since September 11. Now the Partnership is supplying Bloomberg with the independent, nongovernment-sourced numbers he needs in the Capitol, just as the Manhattan Institute, the conservative think tank, provided Giuliani, in his first term, with ammunition against what he saw as the city’s entrenched interests.
“The Partnership has replaced the Manhattan Institute,” agrees Mitchell Moss, director of NYU’s Taub Urban Research Center and an adviser to Bloomberg. “This study is an example of the forces they can pull together, in both research and leadership.”
When lobbying a U.S. Senator, it’s often helpful to bring along someone whose grandfather’s portrait is hanging on the senator’s wall. Earlier this month, Speyer and Wylde and a labor contingent including Randi Weingarten took the 7:30 a.m. shuttle to Washington. They brought with them David Rockefeller, now a spry 86 years old, coming out of retirement to champion the city during its new fiscal crisis.
And as it happens, David Rockefeller’s maternal grandfather, Nelson W. Aldrich, a turn-of-the-century Rhode Island senator, is rendered in oil right next to Ronald Reagan and Richard Nixon in the ceremonial office of Senate Minorty Leader Trent Lott. When Lott points this out, Rockefeller mentions in his quiet but regal voice that he thinks it was a gift to Congress from his brother Nelson.
Lott gets the picture. He knows that his visitors are pushing their $5 billion tax-credit plan and that they also want that $20 billion the president promised before it’s appropriated away to Duluth or Tampa. But he also knows the whole country is in a recession, that many in Congress feel burned by the pricey airline-industry bail-out. And so the dance begins.
Speyer gently reminds Lott that the terrorists attacked not just New York but America. Lott smiles and agrees. Rockefeller says the city’s businesses need help. Lott smiles and says he understands. Deryck Maughan, a Citigroup vice-chairman, reports gravely that his colleagues are considering leaving downtown. Lott smiles and says the Senate is prepared to make a commitment, and so should Wall Street. Asked whom he likes in the World Series, Lott smiles and says he’s a Yankees fan … but he also thinks very highly of the Diamondbacks.
To help their case in meetings with a half-dozen senators, the New York team has brought along some daunting statistics from its economic study. The Partnership estimates that the disaster will displace 125,000 jobs by the end of the year. Some of those jobs are lost to New York forever, Wylde says. But the bigger problem may be downtown’s remaining 270,000 jobs – all of which are at risk of being lost unless conditions improve soon.
As Wall Street goes, unfortunately, so goes the city. The study estimates that people who work in the financial-services and insurance industries represent only 10 percent of the city’s jobs but generate 26 percent of the gross city product. The study doesn’t try to predict next year’s budget deficit, but the reality is that City Hall had counted on the Wall Street economy’s expanding over the next several years. In the nineties, New York had confidently tripled its debt from $11 billion to $33 billion, which increased its debt service by almost 50 percent. Given projected expenses and tax shortfalls, conservative estimates put next year’s deficit at $4 billion. And that may be optimistic.
The best recourse, the Partnership says, is to shore up the city’s tax base by rewarding downtown companies for not leaving – with a $4,800-per-employee tax credit for businesses that stay. But is Washington really interested in giving that kind of money to a city of billionaires? No Congress in history has ever used emergency funding to close an afflicted city’s budget gap. A few senators on the Partnership’s appointment list in Washington are openly skeptical. Montana’s Max Baucus, the chair of the Senate Finance Committee and an ally to New York’s senators, says he understands that the nation’s fortunes rely on New York’s fiscal health. But he urges the group to find ways for Congress to “think of New York as more of a part of America – so they don’t just think this is just for New York.”
Leaders of the Partnership are aware that this is a hard sell. “If we think we can go and say, ?Help the financial-services industry,’ and they’ll say, ?Okay, here’s a check,’ then we’re sadly mistaken,” Kravis says. This is why they tried to give the aid package a free-market spin. Nowhere in their proposal is there money for rebuilding a single building. “The government should be focusing its efforts on things the private sector would never take care of, like the infrastructure,” Kravis explains. “That’s a salable point in Washington. It’s just the way the government works.”
“The incentives should go to the tenants, not the landlords,” adds Speyer, one of the biggest landlords of them all. “Landlords should be driven by the marketplace like everybody else.”
The partnership’s report prescribes urgent care for tourism, small businesses, and the retail, health-care, and insurance industries. Curiously, though, rebuilding Wall Street may not be the cure-all people think it is. One surprise in the report is that while the attack wiped out about 29 million square feet of office space, 30 million square feet were made available around the city almost immediately. “I was surprised to learn that the tenants that remained were able to be absorbed,” Kravis says. “I guess that means we have excess space.”
So if Wall Street doesn’t need space, what should New York build? Kravis has been working on problems like this for the past five years, ever since he founded, with Speyer’s encouragement, the Partnership’s New York City Investment Fund. “Jerry said, ?Look, I’m trying to come up with some interesting ideas.’ And I said, ?Well, I have this idea: Go to 100 people and try to get $1 million each from them. We’ll be the investor of last resort.” The first fifteen calls they made, they got $15 million.
So far, the Fund has put $52 million into 48 projects; for every ill-fated Kozmo.com, there’s been a Royal Health Care, a Queens and Brooklyn managed-care organization formed by inner-city hospitals that paid the Fund back ahead of schedule. Even so, for several years the Fund had difficulty finding investments. Early on, city and state economic-development agencies called on Kravis to help bail out the Farberware plant, a factory in the Bronx that employed more than 400 people. After checking with some colleagues, he learned that the low-end pots-and-pans business was almost entirely located outside the U.S., where labor was cheap. “We said to the city, ?Had you not waited until it was too late, we could have saved them,’ ” Kravis says. When a highly lauded proposed paper-recycling mill in the Bronx came looking for an investor, the Fund crunched the numbers and found that even if the mill got every regional client, it would run at only 50 percent capacity. The Fund respectfully declined.
Thinking further ahead, the Fund studied New York’s biotech gap, discovering that while New York still arguably has the nation’s best hospitals and research institutions, the city has about 2,000 commercial biotech jobs and the Bay Area has 71,000. The city is so behind on the commercial-biotech front that its research institutions are starting to lose their share of NIH grant money. In five years with minimal investment, the Fund suggests, New York could win back a large share of the business. The capital and know-how are here already. The hurdle has always been space. Now that may not be such a big problem. In the post-genome, post-anthrax era, biotech could be the twenty-first century’s most promising industry.
“I think we can find one or two biotech sites in lower Manhattan,” says Fred Wilpon, the Mets owner, who made a fortune in biotech, albeit in Seattle. “We have the opportunity to take advantage of a tragedy here, but this group is going to have to take a leadership role, because the financial industry is going to lose thousands of jobs.”
“It would be hard to say no to lower Manhattan for any reason,” says Dr. Gerald Fischbach, dean of faculty of Columbia Medical School, whose Audubon research facility has been fully rented for more than a year.
Jerry Speyer is on the shuttle back to la Guardia, and he’s smiling for one of the first times all day. The Tom Daschle meeting went best of all – the Senate majority leader said he would try to get the money now, even if Congress couldn’t come to an agreement on an economic-stimulus package by Thanksgiving. On the way out the door, Schumer slapped Speyer on the back and said, “If all of our meetings were like this, you wouldn’t have to come down here.”
Not that all the lobbying has been headache-free: At a chaotic press conference just before lunch, a few members of New York’s congressional delegation, including Carolyn Maloney, slammed the president for “reneging” on his $20 billion promise to New York. All the color drained from Speyer’s face when he heard it; all that behind-the-scenes work, undermined. “It’s just wrong,” Speyer told me. “The president has been so great on this, emotionally and financially. Any notion that he’s going back on his word is unacceptable.”
Now all Speyer wants is to land in time to get to the Bronx for the World Series. His eyes are red, the result of a late night watching all ten innings of Game 4. Much about the political game of Washington, the supplication, clearly pains him. “The flag-waving is just one part of the exercise,” he tells me, removing his shoes and stretching his legs as much as he can in the shuttle’s coach seat. “The second part is spending time with people that you have relationships with and persuading them of the merits of your argument. And then I think it’s very important to work with the staffs. In some ways, it’s very much like negotiating a contract.”
Speyer has always fancied himself a free-market, laissez-faire kind of guy. The last time he lobbied in Washington was when tax changes threatened to hurt the real-estate industry. Now it’s as if that whole previous life was a dream. He was in Howard Rubenstein’s office when 2 World Trade Center was hit. The two old friends stared at each other in disbelief, watching Olympus crumble on television. “The federal government has a responsibility to respond to warlike situations,” he says. “If New York is to persevere, we have to be the financial center. Because if we aren’t, the financial center won’t move to New Jersey. It’ll move overseas.”
But neither Speyer nor Kravis is likely to mourn the apathy on the part of the business community that was blown up on September 11. “I’ve often thought about cities around the U.S where the private-sector leadership pulled together to make things happen,” Kravis told me a few months before the attack. “You can find it in Baltimore and Kansas City and lots of cities around the country, but New York did not come to mind.”
If it does now, some wonder how long it will last. “There are two types of leadership, grassroots and brassroots,” says Regional Plan Association executive director Robert Yaro. “New York used to have brassroots, but now the top leadership of corporations has really taken a backseat. You can get people to show up at a meeting or two, but you can’t get the head of Citigroup to do what a Walter Wriston did back in the seventies. Rather than lighting candles for the second coming of Felix Rohatyn, we just have to move on here.”
On the shuttle, I ask Speyer why a billionaire would bother with a trip like this. His answer suggests that this is something he feels he has to do – the new price of doing business. It also reveals him to be a closet sentimentalist: a tough modern businessman who still yearns for another New York, an older New York, where all business was local and all relationships – civic, philanthropic, social, political – were believed to be tied together for the common good.
The smile is easier now – less strained, more wistful. “When you watch leaders like David Rockefeller and others like him, you can’t help but say to yourself that this generation has an obligation to try to do the same things,” he says. “It’s not money; it’s time. The money part is easy.”