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billion loss in a single trade, which for me was ample proof that we should bring back the Glass-Steagall Act of 1933, repealed in 1999, which prohibited investment banks, which undertake risky ventures like the trade in question, from doing retail banking, and prohibited retail banks,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.
|Mr. Dimon at a 2013 conference. He looks good in blue. And notice the cufflinks.|
|Chase's corporate headquarters at|
270 Park Avenue.
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?
|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
|One World Trade Center in fog.|
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.
|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
|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.
| 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.