‘New York feels much calmer than London about the financial crisis. It's not clear if this attitude is a product of resignation or sheer denial, schadenfreude against wealthy financiers, or perhaps a kind of emotional hardiness born of the 9/11 attacks.’
It’s an elegant uptown crowd at the private screening of Che, a new movie about the guerrilla leader directed by Steven Soderbergh and starring the superb Benicio del Toro. Though the film is an overlong hagiography of the most gullible kind, it nevertheless wins the enthusiastic applause of the socialites and literati assembled by one of New York’s top film PRs. After the screening the audience repairs to a dinner hosted by the director at the Plaza Athénée Hotel. They seem coolly untroubled by either the doctrinaire Marxism of the film or the fact that this afternoon the Dow has plunged by 300 points. Looking around the dining room at the women in cocktail dresses and the men in sleek suits, I’m briefly reminded of the ballroom sequence in The Godfather Part II, the one in which a tuxedoed Cuban elite dances feverishly while the rebels close on the capital.
In general, New York feels much calmer than London about the financial crisis. Among people not directly involved with financial services you’re more likely to hear jokes about the bad times to come than Jeremiads. The Gawker website lists “top 10 scapegoats for America’s depression” and offers clips of “20 movies about the first great recession to watch during the sequel”. It’s not clear if this attitude is a product of resignation or sheer denial, schadenfreude against wealthy financiers, or perhaps a kind of emotional hardiness born of the 9/11 attacks.
It may be because, unlike London, property prices have not yet come tumbling down. Prices here never reached the absurd heights of London’s market, partly thanks to an increased supply of housing during the Bloomberg years, and partly because of the co-op system (which requires that apartment-buyers put significant cash down to get into more desirable buildings). People are certainly expecting a drop, as Wall Streeters are forced to sell their lofts in the trendy Tribeca area and wealthy foreigners lose their currency advantage, but so far New York City has been spared the real estate collapse that wracks the rest of the country. Moreover, rents are widely believed to be going up.
Another factor in the surprising equanimity with which New Yorkers are dealing with the crisis is politics. The 4 November election is a bigger subject of conversation than the meltdown that seems likely to have a catastrophic effect on the financial health of both city and state. In particular, there is widespread joy at what is seen as the near certainty of an Obama victory in the presidential election – and contempt for Sarah Palin. Indeed, outside some conservative circles, even a mild statement of sympathy for the Republican candidates can prompt a dinner-party-killing torrent of abuse. The ferocity of anti-Republican feeling now is greater than anything I experienced in 13 years of living in New York.
This includes rants about “Republican deregulation” being responsible for the financial crisis. Republicans reply that this formulation ignores the role of left-wing Democrats like Congressman Barney Frank in pushing Fannie Mae and Freddie Mac to offer mortgages to poor people with bad credit, or the fact that many of the big New York investment banks are run by Democrats who backed Clinton and now back Obama. People on both sides tend to forget that much of the American and New York boom grew out of deregulation of telecommunications, air-travel and interstate trucking – all deregulation that began during Jimmy Carter’s Democratic administration.
New Yorkers are also pleasurably distracted by a controversy about Mayor Michael Bloomberg. Recently, he revealed that he wanted to overturn the city’s term-limits law and stand for a third time in 2009. As Fred Siegel, a Cooper Union professor and former adviser to Mayor Rudy Giuliani, points out, Bloomberg is more powerful than any New York mayor of the modern era. “He’s our Berlusconi.” Despite breaking his promises never to raise taxes or challenge the term-limits law, despite his obsession with imposing nanny-state bans on smoking and trans-fats, Bloomberg remains spectacularly popular among New Yorkers of all backgrounds, with an approval rating of over 75 per cent. Nevertheless, he may be regarded as a failure in years to come, or at least as the mayor who failed to use the bonanza that once came in from Wall Street to repair the city’s ageing infrastructure.
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The only place where alarm seems palpable is in the downtown financial district. During the day, there are TV vans parked all down Wall Street, and crowds of tourists stop to gawk at blow-dried newscasters with serious faces as they to speak to camera. At night, the area seems much quieter than it did a year ago. No longer do you see limousines delivering dinners from expensive restaurants for bankers pulling all-nighters; that business has shifted to Chinese men on bicycles.
My dentist has his office on a high floor of the AIG building, a gorgeous art deco skyscraper one block north of Wall Street. It still takes a long time to get past the building’s absurdly tight security – as in so many major office buildings you must submit to searches, X-rays and photographs before approaching the elevator banks – but at three in the afternoon, people are already on their way home. Posted in each elevator is a letter from the latest chairman of AIG urging resilience in almost Churchillian tones and promising that departments of the company will be sold off only to appropriately respectable and successful firms. The dentist’s assistant points out photographs of two former AIG CEOs in the business section of the paper. Maurice “Hank” Greenberg is the man who built the insurance giant and who warned that a business built on risk should not engage in risky financial speculation in products like “credit default swaps” based on “junk” securities. He was essentially forced out by New York’s now disgraced governor Eliot Spitzer. Greenberg’s successor Martin Sullivan presided over a regime that allowed a company with 116,000 employees to be bankrupted by the activities of its 300-man London financial unit.
There’s a newsstand down the street from the AIG building at the corner of Broadway and Pine, but there’s a sad gap in the piles of newspapers below the magazines. The New York Sun – the first major media casualty of the financial crisis – closed on 30 September. Its tragic demise is all the more upsetting given the way the New York Times has apparently given up its pretensions to objectivity, running pro-Obama or anti-McCain “news” stories on its front page every day.
I was working for the New York Post when the first issue of the Sun came out in April 2002. A wag put up a “Sun Death-Watch” in the newsroom and almost everyone at the paper put in a wager as to the Sun’s lease of life. Most bets hovered around the six-month mark. It was extraordinary that the Sun lasted so long in an economic climate so hostile to newspapers, especially a newspaper as deliberately and delightfully old-fashioned as the Sun.
The paper’s founder and editor, Seth Lipsky, sought to revive the newspaper traditions of his childhood – he even ruled that his youthful staff had to wear suits and polished shoes – and to counter the influence of the New York Times, which often seems like the Pravda of bourgeois New York, instructing the residents of the Upper West Side as to acceptable opinion on all matters political and cultural.
As Herb London, president of the Hudson Institute, says, for many New York conservatives “the Sun became the real paper of record”. Slim and lively, it was bracingly pro-American, pro-Israel, pro-Bush and pro-war and covered the UN with rare attention and scepticism. It became essential reading for New Yorkers who care about the murky politics of state and city government. It also won praise and non-conservative readers for its sports and arts pages. The latter were happily highbrow, with none of the Times‘s desperation to seem cool. Like the New York Observer in the 1990s, the Sun gave a platform to ambitious young journalists, many of whom were then hired by bigger, richer publications. In the meantime it lost $1.5 million a month and Lipsky had the misfortune of having to look for new financing just as disaster hit Wall Street.
Things aren’t looking good for the Sun‘s surviving competitors either. All of them have physically shrunk over the past year: both the Times and the Post are narrower or shorter by about four centimetres and the Times has cut its four daily sections to two.
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As I write, it is shaping up to be the worst week ever in the history of the Dow Jones Industrial Average. Rumour has it that both of the city’s tabloids have teams of reporters ready to cover suicides of the recently rich, but so far no one is jumping out of windows. “Do you think it actually felt like this in 1929?” I’m asked by a writer-turned-internet-entrepreneur enjoying the October sun on a bench in the park. “Maybe we imagine that it was more dramatic and all-encompassing than it really was.” As we talk, he repeatedly checks his BlackBerry for the latest news of the market, marvelling at its vertiginous drops. But for him, like many people not directly involved in finance, the immediate state of the stock market is a relatively abstract concern. The value of his retirement account has dropped but he’s fairly sure it will go up again long before he retires – if he retires – in a decade.
One of the things that New York businessmen find strange about London is the absence of shoe-shine shops. There are dozens of them in midtown and downtown Manhattan and these days they are almost entirely staffed by Central American immigrants. For nostalgic reasons, I visited Infinity Shoe Repair, my favourite from my days as a midtown lawyer during the recession of the early ’90s. The shop, with its eight high chairs, is down in the subway near the Citicorp skyscraper and close to the HQ of Lehman Brothers. Hector, who runs the place, says that his business is already down by 25 per cent. People like Hector and his staff are among the half-a-million or so working-class and poor New Yorkers whose incomes are directly tied to the fortunes of the tens of thousands of New Yorkers who work in finance.
Everyone knows that change is coming; no one knows how big or how bad it will be. At a crowded salad bar in midtown, a gloomy business editor tells me, “You won’t recognise this city in six months.” But pessimistic though he is, he doesn’t foresee a return to the kind of stagnation that characterised New York in the recession years of the ’70s. Then the city was not only bankrupt, but also wracked by endemic crime and disorder that drove businesses and middle-class people to flee. Some people have wondered whether crime will return if there’s a long recession or a depression. However, the experience of both New York and London seems to indicate that there is little causal connection between economic distress and violent crime in societies in which no one starves. New York City enjoyed the lowest crime rates in its history during the ’30s when unemployment was at its height. London, on the other hand, has suffered an explosion in violent crime in recent years even as its economy boomed.
Walking around Manhattan, it’s easy to spot one major reason why people are less likely to be mugged or assaulted here than in London. In New York the state maintains a human presence that deters crime: CCTV cameras are rare, but police officers are everywhere and on foot. Seeing them on street corners, trains and buses, I was struck by how unpoliced London feels by contrast. Perhaps it’s not surprising that RocknRolla, the new Guy Ritchie gangster film set in London, is both a critical and box-office success in New York, but was a failure in a home country where violent crime can feel very real.
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At dinner in the Rockaways, the New York City peninsula whose beaches are pounded by Atlantic surf, a building contractor tells me that a colleague of his has been offered apartments in lieu of pay by the cash-strapped, credit-starved owner of a half-completed new block. Since I was last in New York a year ago, dozens of new condominium buildings have gone up (Mayor Bloomberg is a good friend to the construction and property industries). It’s not clear if all of them will be completed.
That evening, I also meet a woman who has been sacked that very day by Barclays after 13 years at the firm and only a couple of years short of retirement. She’s being replaced by a younger person from one of the Lehman Brothers units bought by the bank. She seems shell-shocked. Her husband, who like many people here believes that the dollar will continue to strengthen as Americans and others flee to US government bonds, says he’s looking forward to travelling to Europe again as it becomes less expensive.
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While I’m having breakfast in a newly-opened high-end bakery, the manager says that business has gone up over the past week. Next door, a coffee bean emporium run by Chinese-Americans with strong Bronx accents is packed with people buying exotic varieties to grind at home. Apparently, people treasure the small inexpensive pleasures of life at times like this. If so, it’s good news for the Korean nail salons, the Egyptian hot-dog vendors with their ubiquitous carts and other purveyors of comforting treats.
Media friends posit other potential benefits of a downturn. One recalls the last recession as a politer, more egalitarian time. Another wonders if a property crash might bring back the artists long driven out of Manhattan by soaring rents. I can’t help but remember that in the early ’90s the city was less dependent on the financial industry than it is now.
But the people in the café terrace look calm and peaceful as they enjoy the warmth of an Indian summer day. Perhaps they are making the most of the last good times before the inevitable tsunami hits the city; perhaps they are simply sure that New York can and will survive anything that is thrown at it.