This is a note about BIG – BIG as it
relates to banking, and BIG as it relates to real estate. Banking first.
JPMorgan Chase and Mr. Dimon
Viewers of this blog know the love I bear my bank, JPMorgan
Chase and its CEO, Jamie Dimon. I truly
love my local branch, whose staff have been consistently courteous, friendly,
and helpful, even if I refrain from sampling the free coffee and candy that
they dispense so generously. But as
regards the illustrious Mr. Dimon, an undeniably handsome gentleman who looks
like the quintessential corporate CEO, impeccably groomed, poised, and
authoritative, I confess to a few reservations.
Under his leadership, several years ago his bank suffered a grievous $6
billion loss in a single trade, which for me was ample proof that we should
bring back the Glass-Steagall Act of 1933, repealed in 1999, which prohibited
investment banks, which undertake risky ventures like the trade in question,
from doing retail banking, and prohibited retail banks, which deal with the
likes of you and me and hold our money, from doing investment banking, with all
the risks such banking involves. The
lack of such regulation was a major cause (though not the only one) of the
financial crisis of 2007-2008. Not that
there’s any chance of serious banking reform happening soon.
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| Mr. Dimon at a 2013 conference. He looks good in blue. And notice the cufflinks. Steve Jurvetson |
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| Chase's corporate headquarters at 270 Park Avenue. Elisa.rolle |
Now JPMorgan Chase has announced
disappointing earnings for the fourth quarter of 2014 and potential new legal
costs, and Mr. Dimon is unhappy. “Banks
are now under assault,” he has told reporters.
“In the old days, you dealt with one regulator when you had an
issue. Now it’s five or six. You should all ask the question about how American
that is, how fair that is.” He may have
a point, but if all those regulators are scrutinizing his bank’s activities,
those activities must be suspect; time will tell.
Mr. Dimon is also indignant at the thought – proposed by some investors – that his bank, the biggest in the U.S., is too big, too unwieldy, and therefore that it should be broken up. Their complaint isn’t that JPMorgan Chase is too big to fail – which it certainly is – but that its size inhibits efficiency, an allegation that Mr. Dimon vigorously denies. For him, BIG is good.
And it’s certainly good that his bank’s
reported profit for 2014 as a whole was $21.8 billion, a 21 percent increase
over 2013, and the highest annual profit in the company’s history. Because this quarter it had to set aside $1.1
billion to deal with an industry-wide investigation of manipulation in foreign
currency markets – just the sort of esoteric wheeling and dealing that big
banks indulge in and ordinary citizens cannot comprehend.
Big bank, big profits, big investigation,
and probably big fines. But the very
idea that Chase might have to shrink strikes Mr. Dimon as downright
unpatriotic, since it would open the door to foreign competitors. “I wouldn’t want to see the next JPMorgan
Chase be a Chinese company,” he states emphatically. The very thought should horrify us all.
The Real Estate Board of New York
Though I’ve been a resident of this city
for decades, I had never
heard of it. Which goes to show how New
York’s immensity and diversity can leave one totally unaware of vital aspects
of its economy and culture. But now, in
the New York Times of January 15,
2015, it has sponsored a whole 24-page section, discreetly labeled
“advertisement,” celebrating its presence and significance. “200 hundred years of experience,” it
declares, “and we’re just getting started.”
So what is it?
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| Their plaque at 570 Lexington Avenue. Leonard J. DeFrancisci |
The Real Estate Board of New York (REBNY),
with 16,000 members and dating back to 1896, is the real estate trade
association of New York, promoting the industry’s interests and voicing its
needs and opinions. Needless to say, it
advocates lower real estate taxes, less regulation, and more development. And REBNY and the industry it represents are
BIG. For while tourism and fashion and
publishing and the media and Wall Street are essential to the city’s economy,
real estate is tops. Says Steven
Spinola, REBNY’s longtime president, “The most important industry in the city
is real estate. Commercial real estate
taxes bring in almost twice as much as the personal income tax in the
city. These are the taxes that pay for
the services that make this city humane, caring, and livable.” So if we deplore Wall Street’s outsized bonuses
but have to acknowledge that, through taxes, they boost the city’s revenues, there’s no
denying that real estate’s earnings do the same. And it’s worth noting that among the guests
attending REBNY’s 119th annual banquet on January 15 at the prestigious
New York Hilton Hotel were Mayor Bill de Blasio, Senator Charles Schumer, New
York Attorney General Eric Schneiderman, New York City Comptroller Scott
Stringer, and other officials, whose illustrious presence there says a lot.
And what is REBNY’s outlook for 2015? At the annual banquet Mr. Spinola announced, “Last year, I
characterized the mood of the industry and the city as ‘reserved
optimism.’ This year, I will drop the
‘reserved’ and say the mood is optimistic.”
Occupancy rates are rising, new development is taking place, and brokers
are making deals, all of which indicates great confidence in the city. In a note a week ago I wondered if New York
real estate wasn’t a bubble about to burst, but the industry itself obviously
scoffs at such a thought. New York City,
it asserts, is at the center of a global economy, attracting investors because of
its real estate market’s size and diversity, and that market’s quality,
stability, and liquidity; above all, foreign money is flowing in. So for 2015, full speed ahead.
And what do those 24 pages of
advertisement show? Pictures of towers
vaulting into the stratosphere, and glowing messages from real estate firms with
captions like these:
CONNECT
WITH WHAT’S NEXT
MAKING
MOVES IN 2014
OPEN
FOR BUSINESS
TOWERING
SUCCESS / 1 MILLION SF LEASED
ANOTHER
TOWERING ACHIEVEMENT
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| One World Trade Center in fog. Apricot50 |
So REBNY is all about BIG, BIG, BIG,
and BIG at its most modern and blatantly daring, BIG that dwarfs us mere
individuals, that seems to leave us out.
For those office and residential towers have nothing to do with you or me;
they are intended for corporations and individuals who, having billions to
spend, are in tune with these heady times.
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| A 40-story residential tower at 400 Park Avenue South. Advertised as "the pinnacle of modern living." But I wouldn't want to live in a pinnacle. Justin A. Wilcox |
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| One Madison Park, at 23 East 22nd Street, advertised as overlooking "the lush green oasis of Madison Square Park." Doorman, concierge, swimming pool. Pets allowed. Average sale $4,562 per square foot. Fletcher6 |
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| An office tower under construction at 10 Hudson Yards on Manhattan's West Side. The first of 16 planned high-rises in the area. Justin A. Wilcox |
One photograph, just one, in those 24
pages is a throwback to an earlier age, showing a neo-classical office building
at 315 Hudson Street that is only a mere eight stories high – to my way of
thinking, human size. Why is this
venerable edifice shown? Because it’s
being upgraded and the upgrading will include installation of a “green
roof.” And what is a “green roof”? A roof with greenery growing in a bed of soil
planted over a layer of waterproofing.
So bravo for the preservation of an old building and the addition of a
green roof. But what really appeals to
me about 315 Hudson Street is that I don’t get a stiff neck looking at it; far
from soaring, it just sits there, squat and solid. It doesn’t dazzle, it reassures.
Yet I can’t deny that those pictures of
soaring towers – those glass and steel needles that spike the sky -- do dazzle. They are today’s expression of Go Ahead, of
what I have called the city’s dark eros, its blind urge to push on, its
expression of Dream, Dare, Do, the feeling
(or illusion) that this city and country can do anything, that the eyes of the
world are upon us: the very essence – for better and for worse – of America.
Is this hubris? Will this mood still be with us a year from
now, or will the bubble, if bubble there is, have burst? I have no idea. But as always, New York is an exciting place
to be.
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