New York
22 September 2008
New Yorkers have a reputation for being resilient and bouncing back from crisis to crisis. Last week's financial upheaval hit Wall Street, the nation and the world pretty hard, but many people in New York kept their tough, impervious, can-do attitude alive and well. VOA reporter Mona Ghuneim reports from the U.S. financial capital.
New Yorker Charles Morris says the collapse of American investment bank Lehman Brothers, the federal government's bailout of insurer AIG, and the overall extent of Wall Street's woes did not surprise him one bit.
The author, lawyer and former banker says the mayhem was a long time coming. His New York Timesbest-selling book, The Trillion Dollar Meltdown, paints a bleak economic picture, scrutinizing today's economic afflictions and calling for U.S. officials and financial leaders to admit the scale of the problem.
Morris says the crisis over subprime mortgages - loans to homeowners with less-than-ideal credit ratings, who sometimes default - is just one financial fiasco the United States is facing. Another, he says, is that during the past eight years, the nation bought 105 percent of what it actually produced.
Morris says the United States has amassed $5 trillion in debt through sometimes-risky mortgages, highly leveraged corporate lending programs and credit-card borrowing. He calls these "toxic" assets, and says the country cannot keep spending five percent more than it produces.
"Even after we have written down all of these toxic assets, we have to cut back consumer spending as a percent of gross national product by about five or six or even seven percent," he says. "That is going to be very, very hard, and there is no way that we are going to be able to do that unless we have quite a tough recession."
Ramsey Shiber works for an international commercial bank in New York City. Outside a busy coffee shop in Manhattan, Shiber says he is very concerned about the recent financial fluctuations, but that markets should go up and down. He points out that while sectors like housing and finance are suffering, others are still growing.
New York will not come away unscathed, Shiber says. He thinks most New Yorkers will go about their daily lives as normal, but suggests they may think twice before buying that second or third $5 double latte at their local coffee shop.
"New York is affected [most] because most of the financial institutions have their people in New York," he says. "But people are going to still spend to eat; they are still going to spend to move around; they are going to spend on medicine - so certain industries are going to continue and certain industries are going to have to wait and get through the rough patch."
Shiber says the financial services industry in particular will have a fairly serious "patch" to get through, including lots of job losses.
Local-government officials projected last week that Wall Street's meltdown will likely cost New York up to 40,000 private-sector jobs and $3 billion in tax revenues during the next two years.
Morris says, the faster and deeper the nation goes into a recession, the sooner the country can get out. U.S. government bailouts will temporarily prop up the economy, but the author says "unbridled greed" is still a factor on Wall Street. He predicts it will take some time before, what he calls, the financial world's long and gluttonous party comes to an end.
"Wall Street usually takes about three or four quarters before it lays people off, consistent with its revenues, because these guys all think the market is going to turn next week or next month," he says. "After three or four quarters of downturns, I think that is when the heavy layoffs start."
Wall Street veteran Patrick D'Angelo says he does not think the market will turn back to its heyday anytime soon, and he is bracing himself for a slower and much less lucrative time. The owner and manager of the hedge fund Hyerdale Capital believes the nation is already in a recession, but that New York City might feel it less than the rest of the country.
D'Angelo says a $45 million townhouse in Manhattan may now sell for $35 million, and real estate prices in general will probably come down, but that the essence of New York will stay the same. He calls it a city that is constantly evolving and filled with youth, exuberance and ambition.
"Business needs to get done and this is still the place to get it done," he says. "Are things going to slow down? Absolutely, they will. Instead of 10 restaurants opening in a week in the city, maybe only two restaurants will open in a week. Nevertheless, you are still going to see entrepreneurial spirit alive in New York."
Joyce Manalo embodies that "entrepreneurial spirit" so depicted in thousands of films, television shows and news reports about New York. After being laid off last year by a German investment bank in New York, she started her own artist-representation company. Like the name of her firm, Art Forward, Manalo says she just has to keep moving ahead.
But Manalo is apprehensive about the economy. As someone who represents emerging artists, she says the financial fallout will affect her "market" as people cut back on buying art, especially from lesser-known artists. She says she will manage, but worries about lower-income New Yorkers, and expresses her irritation at Wall Street executives and the federal government's treatment of their wrong doings.
"I think Wall Street always just gets a slap on their hand," she says. "The government should just let some of these giants fall. They need to clean up their own mess and we need to start from scratch with a clean slate. I know a lot of people in New York have this really kind of high lifestyle and they can pull back. Even pulling back is still quite comfortable."
How much everyone has to pull back may still be up for debate, but what is certain to these New Yorkers is that the city known for reinventing itself over and over will probably do so again.