Thursday, August 31, 2017

HOUSTON | Building on the Flood Plain

Houston in the wake of Harvey, August 30, 2017.
Houston with ring roads like the 610 can get people in and out (in good weather) quickly from areas that have little apparent land value. 

That’s where a lot of low-income and subsidized housing is built — I’d say most of it. 

They have little land value because they are intentionally placed in floodplains. The Feds still provide funding to rebuild after floods because that’s where the city wants low income housing. Climate change may well be playing a role, of course, but the city fathers are clear that they do not care to pay for massive infrastructure to handle flooding. If you look at the views of the flooded city, you’ll note that the bayous and streams are where they built most of the road infrastructure. – Josh Vincent, Director of the Center for the Study of Economics.

Monday, August 28, 2017

TRUMP | The (First) Big Deal

New York City taxpayers are still paying for  the tax abatement that Donald Trump obtained from the City Council in 1977!

The tax benefit does not expire until 2019.

I watched that abatement get baked in 1977 when I was serving as President of the Council on Municipal Performance in New York City.

Two members of the New York City Council who were on my Board of Advisers called me up and asked me:
Could you please speak up against a proposal by Donald Trump to get a huge property-tax concession to renovate the Commodore Hotel while bringing nothing to the table. He will take the concession and sell it. No one else is prepared to say anything about this.
I checked it out and quickly agreed. Yes, it was a giveaway. It should not go ahead. I prepared a critical comment and delivered it on a radio station (ABC affiliate, I recollect).

Imagine my surprise when I discovered a few days later that these two City Council members voted for the concession that they asked me to oppose. I was annoyed...

"What's going on here?" I demanded to know.

"Oh, sorry, we should have called you. One of the deputy mayors said we really need this to turn around the neighborhood. The Commodore Hotel is an embarrassment to the City."

I have been trying to make sense of all this in the 40 years since then. Here's my best understanding of what happened, i.e., the forces that swept away rational discussion.

Fred Trump Cashed in Some Political Chits 

Fred Trump was a serious real estate empire-builder, like Fisher, Lefrak, Rudin, Tishman, and Zeckendorf. He started his personal real-life Monopoly game in 1923, when he was too young to sign his own checks. After the war he immersed himself in federally financed housing projects.

Fred and his wife, Mary, raised three sons and two daughters in a mansion in the most upscale part of Queens, Jamaica Estates. The eldest son succumbed to alcoholism at an early age. The other two sons continued their father's preoccupation with real estate. Fred was especially impressed with his son Donald, of whom he said: ''He was a pretty rough fellow when he was small. He amazes me. He's gone way beyond me, absolutely.’' The two daughters went into law and banking.

Fred and Mary Trump believed in hard work.  They sat at the feet of Reverend Norman Vincent Peale, who spoke highly of the Trumps back in 1983 when he was interviewed by Marylin Bender of the The New York Times.

The family believed in positive thinking. They gave money to politicians and they were positive that their generosity would be appreciated when political support was needed.

Donald Trump

Donald Trump prided himself on being street smart and has called Queens and Brooklyn, where he was raised and started working, among ''the toughest, smartest places in the world.'' After attending the Wharton School for his bachelor's degree, Donald Trump joined his father's business, then a collection of middle-class apartment houses in Brooklyn, Queens and Staten Island worth roughly $40 million in 1983 dollars. 

Fred sent Donald as a difficult teen-ager to the New York Military Academy in Cornwall-on-Hudson. During summers, the boys worked at Trump construction sites or in rent collection offices. ''Not your normal kid's vacations,'' noted Donald's brother Robert Trump. 

Trump told Bender in 1983: ''I don't like to lose.'' She noted that he reneged on a promise to donate to a museum the Art Deco bas-reliefs on the facade of Bonwit Teller's that were  bulldozed to make way for Trump Tower. It was a sin deemed unforgivable by landmark preservationists.
Harry Levinson, a Boston-based business psychologist who has studied family businesses, observed: 
The core problem of the entrepreneur in the family business is the unresolved Oedipal problem, trying to beat the old man. This is particularly so where the father has been very successful. The son feels so inadequate and unable to compete with the father that he works out compensatory behavior. He goes to the opposite and blows himself up to deny his feeling of helplessness.
Commodore Hotel Deal

Since the Grand Hyatt opened in 1980, it has been credited by some with reversing the deterioration of East 42d Street. The renovated Commodore Hotel emerged from this sequence:
  • Donald Trump purchased for $500,000 an option to buy the run-down Commodore Hotel, where sex was openly for sale, from the bankrupt Penn Central trustees. At that time several nearby office buildings were on the edge of foreclosure, as New York City faced bankruptcy starting in 1974.
  • Donald Trump took his option on the Commodore, for which he would ultimately pay $10 million, less $2 million from the sale of its furniture and equipment, to line up a partner in the Hyatt Corporation, which was looking for a New York link for its hotel chain. He would build it and Hyatt would manage it. They would be equal partners.
  • Trump enlisted George Peacock, senior vice president of the Equitable Life Assurance Society to put together financing. Concerned about the area, the Equitable brought in the Bowery Savings Bank and several smaller banks and promised Trump $70 million in mortgages once the doors of the renovated hotel opened.
  • ''So I took this commitment, which was a statement with 100 stipulations, to the city,'' Trump said. One of those conditions was that the financing be predicated on obtaining a tax abatement. ''I said, 'I will build you this incredible, gorgeous, gleaming hotel. I will put people to work in the construction trades and save hotel jobs and the Grand Central area will come around.' So the city made the deal.’’
  • Trump obtained a tax abatement worth $160 million over 42 years (the abatement is still in effect in 2017).
  • Besides the tax abatement, Stanley Friedman arranged for a special permit to allow Trump to build the hotel's restaurant. Friedman then left his government post to join the law firm of the Roy Cohn, of which Trump was a major client.  
  • The 42-year tax abatement from the city was the first ever granted to a commercial property. The city had no legal authority to grant it, so the Urban Development Corporation was enlisted to take title for $1 and lease the hotel property back to Trump for 99 years for an annual "rental" of $200,000 a year, which was called a PILOT, a payment in lieu of taxes. If the PILOT was a rental, then the property was totally exempt from property taxes. A sweet deal, either way. Meanwhile, Trump had at his disposal the agency's powers of condemnation to rid himself of undesirable retail tenants. 
  • Rival hotel operator Robert Tisch objected to the abatement on the grounds of unfair advantage. Tisch said the $200,000-a-year PILOT from the Grand Hyatt was the equivalent of the tax bill for a motel on Eighth Avenue. 
After construction was underway, in 1979, New York City's economy picked up. Hotel rates doubled and Trump changed his plans from a modest $38 a night to a luxury $90+ a night. Donald Trump said:
The whole economics of the deal changed. It was timing. In another year, I wouldn't have gotten the abatement and no one ever will again. 

Roy Cohn
Fred Trump was closely involved with the Brooklyn Democratic organization that produced Mayor Abraham D. Beame and a New York State Governor Hugh L. Carey. They were in power when Donald Trump decided to enter the Manhattan real estate scene in 1974 and 1975.

The Trump Organization hired lawyers with political access – Roy Cohn of Saxe, Bacon, Bolan & Manley, and the firm of Shea & Gould. 

Donald Trump supported Ronald Reagan in 1980 and was invited to the White House several times.

Although Donald Trump grew up in Queens and learned about real estate in Brooklyn, and cut his teeth on 42nd Street in Manhattan, his political power base was in the Bronx. Corrupt Bronx politicians helped Trump. The only photograph of Donald Trump in the book by Jack Newfield and Wayne Barrett  shows Trump scowling as Bronx native Roy Cohn wags his finger at him. Cohn served as Senator Joseph McCarthy’s chief counsel on the House Un-American Activities Committee. He became Trump's mentor.

Cohn’s law partner was Stanley Friedman, boss of the Bronx Democratic Partyunder Beame and Koch, and a deputy mayor under Beame. In 1977, Friedman was the engineer of the tax abatement for the Commodore Hotel for Donald Trump. Cohn made Friedman a partner based on the Trump deal. 

After that deal, Friedman and Cohn went into decline. Cohn died of AIDS in 1986. A year later, Friedman was sentenced to 12 years in prison on federal charges. He was convicted of promising kickbacks in connection with obtaining contracts from the New York City Parking Violations Bureau for a company that wanted to manufacture hand-held computers. He served four of the twelve years. The scandal, exposed during a City Club of New York luncheon that I attended, cost Koch his hope of winning a fourth term.

Trump’s legacy in the Bronx was a golf course named after him. The city built the course and let Trump operate it. Revenue was down in 1983, the course lacked a permanent clubhouse and residents complained that they couldn't afford the fees.

Media Relations

Wayne Barrett wrote a long article on the genesis of the Hyatt Hotel. When Trump announced his candidacy for the presidency, he said: “After four or five years in Brooklyn, I ventured into Manhattan and did a lot of great deals [starting with] the Grand Hyatt Hotel.” 

Over the course of Barrett’s reporting, Trump both threatened to sue Barrett and tried to bribe him.  Trump hinted he could get Barrett a nice apartment in midtown. Barrett said:
[My wife and I lived in] the poorest neighborhood in the city. But both of us were young radicals. We were doing all kinds of organizing there. We published a paper called The People’s Voice. We were doing it as a political thing. … He had checked this out. I certainly hadn’t said anything. And he says to me, in the interview, "You know, Wayne, you don’t have to live in Brownsville. I can get you an apartment."

Barkan, Ross, "How a Young Donald Trump Forced His Way from Avenue Z to Manhattan," Village Voice, July 20, 2015. 

Bender, Marylin, "The Empire and Ego of Donald Trump, New York Times,  August 7, 1983

Fabricant, Neil, "Politics and Real Estate," Bloomberg Watch
Lachman, Seymour P. and Robert Polner, The Man Who Saved New York: 
Hugh Carey and the Great Fiscal Crisis of 1975 (Albany: State University of New York Press, 2010).

Newfield, Jack and Wayne Barrett, City for Sale: Ed Koch and the Betrayal of New York (New York: Harper & Row, 1989).

Saturday, August 26, 2017

TRUMP | Triumphal Triumvirate Trampled

Why did Benedictine-trained ideologues
advance extreme agendas? Was St
Benedict somehow responsible?
Among many of my fellow alumni of Benedictine schools (I attended Ampleforth College and Portsmouth Abbey School for a total of six years), it has been a source of embarrassment that three key advisers to Donald Trump are graduates of these schools. 

The three people constituted a strategic triumvirate. All three are now out. In reverse order:

1. Sebastian (Seb) Gorka 

Sebastian Lukács Gorka attended St Benedict's School for Boys, Ealing Abbey. He was the last of the three to leave his job at the White House, which he did on August 25. He issued a resignation letter, but the White House insists that he did not resign — implying that he was fired. The White House announcement said: "Sebastian Gorka did not resign, but I can confirm he no longer works at the White House."

Gorka was a deputy assistant to President Trump, focusing on national security and terrorism. He was closely aligned with departed senior strategist Steve Bannon, and he seemed to link his departure with Bannon’s in his exit letter.

2. Stephen K. Bannon

Steve Bannon attended St Benedict's College preparatory school in Richmond, Virginia. He was Donald Trump's chief strategist before and after Trump's election. On August 19Bannon was forced out. The decision was "mutually agreed" by White House Chief of Staff John Kelly and Bannon. 

3. Sean Spicer

Spicer attended Portsmouth Abbey School. He was Press Secretary at the Trump White House. He resigned on July 21 after opposing President Donald Trump's appointment of Anthony Scaramucci as communications director. (PS Sept. 6, 2017: He damaged his rep working for Trump, says Politico.) 

Sunday, August 13, 2017

ZELDIN | Lee Z's No Eco-Hero – He's an Eco-Zero

Lee Zeldin's Trump's friend,
On Long Island's East End.
Tea Party? He ran it.
No friends of the Planet.
(Clerihew by JT Marlin.)
The following letter has been published in the East Hampton Star, Thursday, August 10, 2017:

Against the Environment
August 7, 2017
Dear Mr. Rattray,
The Star’s article on Representative Lee Zeldin’s bill to study the future of Plum Island [] could leave the misleading impression that he is pro-environment. He is not.

Since he came to Washington, Zeldin’s votes have been approximately 10 to 1 against the environment, as measured by the nonpartisan League of Conservation Voters []

Of 27 New York State members of Congress, he is among the three with the worst environmental record.

He is using the Plum Island bill to pose as environmentally friendly. But “his” bill was first introduced by the pro-environment former Representative Tim Bishop in 2013, when the threat that Plum Island could become a housing development, or even a Trump resort, was real [].
Now the danger is much less. The Town of Southold put in place anti-development zoning changes; environmental groups with Morrison & Foerster []have sued to prevent commercial development of Plum Island, and the federal budget includes the cost of moving the animal disease research facility to Manhattan, Kan., in 2022.

So Zeldin’s press release grandstanding is cynical misdirection. Instead of being fooled, folks at home should watch his misbehavior in Washington. All of his prior votes in 2017 were against our ecology, including one to delay implementing anti-smog standards.

Zeldin is no eco-hero. His eco-vote is close to zero.

U.S. PRESIDENT | Line of Succession, August 2017

The photos above omit #9, Sonny Perdue (R), Secretary of Agriculture.
The wrong person is also listed as #11, Secretary of Labor; it should be Alex Acosta (R).
Acting officers whose prior appointment required Senate confirmation are considered eligible for the line of succession. 

No Democrats or women appear among the top 14 names on this list. 

The highest-ranking woman on the list would have been Elaine Chao (R), Secretary of Transportation, at  #14, except that she is a naturalized, not a natural-born, citizen. 

1 Vice President – Mike Pence (R)
2 Speaker of the House of Representatives – Paul Ryan (R)
3 President pro tempore of the Senate – Orrin Hatch (R)
4 Secretary of State – Rex Tillerson (R)
5 Secretary of the Treasury – Steven Mnuchin (R)
6 Secretary of Defense – James Mattis (I)
7 Attorney General – Jeff Sessions (R)
8 Secretary of the Interior – Ryan Zinke (R)
9 Secretary of Agriculture – Sonny Perdue (R)
10 Secretary of Commerce – Wilbur Ross (R)
11 Secretary of Labor – Alex Acosta (R)
12 Secretary of Health and Human Services – Tom Price (R)
13 Secretary of Housing and Urban Development – Ben Carson (R)
14 Secretary of Energy – Rick Perry (R)
15 Secretary of Education – Betsy DeVos (R)
16 Secretary of Veterans Affairs – David Shulkin (I)
17 Secretary of Homeland Security – Elaine Duke (I)

Thursday, August 3, 2017

OBIT | Eugene J. Sherman, Gold Expert, Professor

Eugene Sherman, 1935-2017
August 3, 2017 – On June 10, Economist Gene Sherman passed away at 82. I am grateful for being informed of this today by the Downtown Economists Luncheon Group, later Club, of which Sherman was an active member. He wrote the introduction to a history of the Downtown Economists that is added below. He was also a founding member of the Money Marketeers of New York University. 

Gene went on from Chase to the Bank of New York, Merrill Lynch, and the International Gold Corporation working as an economist and banker, gradually becoming Chief Economist.

While at International Gold he authored Gold Investment Theory and Application published by Prentice-Hall. After several years with Morris A. Shapiro & Co, Gene joined the Federal Home Loan Bank of New York as Chief Economist, retiring in 1992.   

He then he began his next career as Professor Sherman, first at Touro College (two years) and then at Baruch College, City University of New York, where he taught Economics and Money and Banking for 14 years. In 2003, he received the Beta Gamma Sigma award for teaching excellence.
He was a Fellow of the Weissman Center for International Business and began building a website, NYCdata, in the Fall of 2004. He retired from this activity in 2014 and was succeeded by Eugene Spruck.

He is survived by his wife, Mary E. "Mimi" Sherman, daughter Rebecca (Javier) Sherman-Morcelo and granddaughters Mina and Sarah. A Memorial Service was held on June 23, 2017 at Edwards-Dowdle Funeral Home, 64 Ashford Ave., Dobbs Ferry. In lieu of flowers, please make a contribution to the Edna Y. Schwartz Scholarship Fund, a 501c3K, at: www.belvoirterrace To view tributes, visit Edwards-Dowdle

Introduction by Eugene J. Sherman, July 1989

History is interesting. Living history is fun. And, the older you get, the more fun it becomes. Collecting and organizing the papers contained here on the history of the Downtown Economists Club was, for me, a lark. While my own membership dates back only to the mid '60s, I have known many of the people and places mentioned in the first two papers, and was present through all of it in the latter period, from 1968 forward.

The three papers comprising the history are self-contained and need no further comments from me. However, a brief addendum seems appropriate. As of this writing, we are in the process of incorporating as a "not-for-profit corporation in the slate of New York. In doing so, we were required to present a set of bylaws. We wrote them on the basis of our best understanding of existing practices, supported in some cases by past memoranda and letters. The entire executive committee—eight in all—reviewed and approved them. The bylaws state, in part,
“The purposes of the Corporation shall be to enhance knowledge and understanding of the forces affecting the economic and financial marketplace and to promote a forum where those interested in economic and financial market outlook may exchange ideas.”
A good purpose, and one in which all of us can take pride. With our large base of membership, history, and new corporate structure, we likely have a bright future. I'm eager to see what the next 20 years will bring.

by Bob Lewis, June 1967

The Downtown Economists Luncheon Group has grown in the past twenty years from a half dozen junior economists sitting around a single table to a group with membership of about 95, with distinguished members and alumni scattered not only throughout the New York metropolitan area, but in many parts of the country.

The whole thing started when Herb Schwartz, then a Junior statistician at the Federal Reserve Bank of New York, met Dave Kass, then working in purchasing research at Western Electric. They had become acquainted while attending Dr. Solomon Fabricant’s course in National Income at New York University.

As Herb tells it, one morning about 20 years ago, Harold Roelse, vice president in charge of the Feds Research Department, asked Herb to get some figures together for him which he could present to the meeting of the AT&T luncheon group at noon. This started Herb thinking, and that evening at Fabricant’s class he and Dave commiserated about how the multitude of luncheon groups and professional meetings open to vice presidents and other high-ranking economists contrasted with the complete absence of facilities for making contacts and exchanging information among the working economists. They agreed that there was a definite need for those handling data and doing research to get to know their counterparts in other organizations. Next morning, each broached the idea to others in his organization of an informal luncheon group for those below the management level.

A week or so later, the first meeting was held at the Coq d’Or Restaurant (formerly known as Alice Foot MacDougall’s) on Maiden Lane, between Pearl and Water streets. Attending this meeting were Dave Kass, Sam Olken, Clint Gardner, and Gunther Steinberg of Western Electric and Herb Schwartz and Bob Lewis of the Federal Reserve Bank of New York. This group agreed to continue meeting once a month and to extend invitations to a limited number of others in the Bell System and Federal Reserve. Members who joined during the first half dozen or so meetings at the Coq d’Or included Virginia Dwyer of Western Electric, Madeline McWhinney of the Federal Reserve, Bob Schultz of Union Bag & Paper Company, and Leo Silverman of the New York State Housing Authority. 

These meetings were held on the second or third floor of this restaurant which was a rather old building and has since been torn down. It wasn't air-conditioned and the enduring memory of those first meetings is one of oppressive heat. The earliest meetings were largely informal, generalized discussions of business developments and the outlook. However, the feeling soon arose that it would be better to have a specific topic with one of the group leading the discussion. Among the first presentations made to the group was one by Dave Kass on some research he had been doing on productivity.

In late 1948, Leo Silverman invited the first outside speaker to talk to the group—Richard Hill, Leo’s boss at the Housing Authority. Toward the end of 1948, the Coq d’Or announced that it was closing and the group began to look around for another meeting place. At first we took refuge in the Cabin, a restaurant on the corner of Pearl and Fulton streets where there was a large round table, around which the total membership — by then more than a dozen — could gather. Members added at that time included Bob Roosa, Edna Ehrlich and Arthur Smith of the Federal Reserve and Peter Bernstein of the Modern Industrial Bank. From time to time we heard outside speakers, such as Professor Richard Gerard of New York University speaking on fiscal policy. But more often it was members of the group discussing topics they were working on, such as Peter Bernstein on the economic development of Israel and Art Smith on public and private debt.

In the fall of 1949, Bob Roosa returned from a visit to the major central banks in Europe just after the devaluation of the pound and was invited to tell us about his trip. For the occasion we shifted to Emil’s, a new restaurant which had opened on Pearl Street. The food was much better, but between the rattle of the elevated train outside and the clatter from the diners inside, few of the group could hear what Bob had to say. Consequently, the next month we went back to the Cabin to hear him give the same talk again.
By now, the group was growing so large that a long table had to be tacked on to the original round table at the Cabin, and the hunt for a new meeting place began again. One meeting was held at Andre’s near City Hall, where Edna Ehrlich led a spirited discussion of China and whether the group then taking over the government were real Communists or just agrarian reformers.

In early 1950, the group started meeting at Holtz’s in the basement of the Woolworth building, where we were able to obtain a private room and sit around a large rectangle of tables. This remained the home of the group for nearly two years.

The years we spent at Holtz’s probably came closest to the original aims of the people who founded the group. We could all gather around one big table. It was still basically informal; the members were for the most part below the senior level, and a large share of the meetings were open discussions with no speaker or program. Gradually, however, things began to change. There was a need for someone to chair the discussions and introduce speakers. So Sam Olken became our first Chairman. He was followed in 1950 by Clint Gardner and in 1951 by Bob Schultz.

The group acquired a name, though more by accident than by design. In July 1951, Herb Bienstock from the New York Regional Office of the Bureau of Labor Statistics came to talk to the group about the work of the BLS. As he was leaving, he mentioned to Dave Kass that he had to file a report on his speaking engagements and asked what the precise name of the group was. Dave replied that up to that moment he had never thought it necessary to have a name. On the spot, Dave and Herb decided that since this was a group of economists from the downtown area who had lunch together an appropriate name would be the Downtown Economists Luncheon Group.

As the group has grown and members have changed jobs, the Downtown label has become less appropriate. But it is now buttressed by 16 years of tradition. Probably Peter Bernstein was the first uptown member, and Jack Gude was our first out-of-state member. When General Foods moved to White Plains, Vince Perry became our first Westchester member. The first membership directory for the group (dated April 2, 1952) shows only two uptown members and one out-of-town member out of a total of 23; the latest directory (June 1, 1966) shows 41 members in the area south of 14th Street, 26 in uptown Manhattan, and 21 out-of-town members (including 9 with nonresident status).

One of the fringe benefits of membership in the group became apparent in this period. Dick Speagle, then Director of Research for the New York State Banking Department, commented during his first visit to the group that he needed an assistant. Leo Silverman’s ears perked up at this, and before the group met the next month he had landed the job as Dick’s right-hand man in the research Division.

During the period at Holtz’s, our speakers included Solomon Fabricant discussing “Productivity As A Basis of Wage Adjustment” a dozen years before the Council of Economic Advisors discussed it; Phil Glaessner reporting on his work with the Abbink Commission in Brazil, Bob Johnson telling us the week after the Korean War started about his work with materials controls in World War II, Henry Wallich discussing a mission to Portugal, and other experts both from the group’s membership and from outside.

By the fall of 1951 we had outgrown the cellar room at Holtz’s. That fall we tried meeting at Volk’s, a German restaurant on Cortland Street. Than came a series of meetings at Delman’s, a restaurant which has since been replaced by Chase Manhattan Plaza. In May 1952, we started meeting at Libby’s, a historic seafood restaurant on Fulton Street, where we had the second floor to ourselves. We stayed there for over a year.

During this period, it again became evident that we had grown too big for complete informality. The first step was the decision to have membership dues to help pay for speakers’ luncheons and other expenses. This made it necessary to draw a line between regular members and guests. Noting that the attendance at monthly meetings had more than doubled in the preceding year, Bob Schultz, who was then Chairman of the Group, appointed an Organization Committee, with Bob Lewis as chairman and Dave Kass and Frank Abell as members.

by Robert S. Schultz, 20th anniversary celebration, June 28, 1967

Over the past twenty years, disregarding our members-only business outlook sessions and omitting the early round table days, the Downtown Economists Luncheon Group (DELG) must have presented some 150 speakers in a wide-ranging program. The growth of DELG is a tribute to the strength of the program as well as to the stimulus of luncheon discussions with fellow professionals.

It is a pleasant assignment to review this twenty-year record, but the reviewer is faced with an embarrasse de richesse, and I hope no one will be offended at any failure to mention any particular program.

Out of courtesy one might say that all our speakers have been equally distinguished, but admittedly some have been more equally distinguished than others. A year ago, for instance, we had James Dusenbery, of the Council of Economic Advisers (CEA), and three years ago John P. Lewis. This seems to be the very pinnacle of distinction in our profession, although it is generally true that the CEA forecasts by the same seat-of-the-pants methods we all use, has no better record of accuracy, and is as cliché-ridden as all the rest of us.

Other CEA members or former members have spoken to us from time to time. Henry Wallich, back at Yale after Council service, spoke in January 1962 on “Economists in Government”, a talk he should publish since it was full of keen insight and almost as witty as Peg Matulis’s studies of hemlines, although based on much less promising material. Arthur Okun has spoken to us on several occasions, both before and after the laying on of hands. Arthur Burns, Steve Saulnier, and Otto Eckstein have addressed us as CEA emeriti.

Other outstanding government speakers include FRB Governor George Mitchell, September 1963. As a Fed economist, Andy Brimmer spoke to us in 1957 on “A Recent Economist Mission to the Sudan”; as Assistant Secretary for Economic Affairs in the Department of Commerce, he discussed the balance of payments program with us in October, 1965, and we looked forward to some future talk from Governor Brimmer.

We have been equally fortunate in bagging distinguished speakers in the groves of academe. Some will be mentioned later; others include John Kendrick (at least twice); Oskar Morgenstern, Princeton; Eugene Rostow, Yale Law.

When the CED Commission on Money and Credit was getting under way, Bert Fox, commission director on leave from Harvard Business School, discussed with us the general program, which involved reliance on research work already under way, and which he described as "getting bodies aboard." That was May 6, 1959. A couple of years later Eli Shapiro, who had been assistant or deputy director on leave from MIT, discussed the findings of the report, which if memory serves may be summed up as “a sound currency in a sound economy, or while MV equals PT, ceteris is not always paribus.”

At some time or other it became specific DELG policy that all talks are off the record. This policy offers a splendid opportunity for top-notch economists, without danger of attribution, to try out ideas and benefit from informed critical response, before an audience of working technicians whose collective competence blankets the field of economics.
Back in April 1961, Arthur Burns took advantage of this opportunity to try out the ideas presented at Northwestern shortly thereafter as “Examining the New ‘Stagnation’ Theory”.

Sol Fabricant, a year before, also tested his ideas on “What Does Productivity Mean” before Incorporating them in the annual report of the National Bureau. Way back in February 1950, Sol spoke to us on “Productivity as a Basis for Wage Adjustment”, anticipating the Council by a decade.
Of course, sometimes the off-the-record policy is not always honored. In 1964, Milton Friedman’s ringing endorsement of what he thought Barry Goldwater’s ideas might be wound up the next day as a story complete with photograph in The New York Times.

This, as it happened, was Friedman’s choice, although it caused collateral complications. More embarrassing was the direct quotation from a government speaker in a widely read financial publication, a quotation which did not entirely agree with the views of a certain Texas politician with whose views our speaker was not supposed to disagree.

In addition to Governor Mitchell, we have had several speakers from the little marble palace in Washington, including a talk in 1957 by founding father Herb Schwartz, “On Electronic Equipment and Statistical Research”. Earlier, in March 1953, Herb spoke to us on “Revision of the Industrial Production Index”, and in November 1959, Frank de Leeuw spoke on the same topic. It’s probably time to start lining up somebody to give that talk again.

Among government agencies, Commerce and BLS have frequently provided us with speakers, the most important occasion—from the viewpoint of this group—being a talk by Herb Bienstock on the statistical program of the BLS, since it was from the bureaucratic need to record destination that our previously anonymous fledgling group was forced to find a name.

Among our various membership categories we should, perhaps, have an “almost” category. George Garvy has never actually been a member of DELG, but he has been so close to so many members for so many years, and has so often been willing to discuss important financial questions with us, that we regard him basically as one of us. Other old reliables, not quite in the “almost” category, have included Goeff Moore and many others from the National Bureau; Al Sommers and many others from the Conference Board; Leonard Silk, Business Week; Dick Netzer, Regional Plan; Roger Wallace, Journal of Commerce; George Conklin, Guardian Life; Bill Butler, Chase Manhattan; George Cline Smith, then with F.W. Dodge, to name just a few.

While our concern is essentially with the economics of business, we have rarely had actual businessmen as speakers. The record shows only two. In May 1952, Fred van Eck, J. H. Whitney & Co., spoke to us on “Venture Capital”. Ten years later, to the month, William Zeckendorf, discussing “Where is the Urban Real Estate Market Going?”, told us that beauty was the only permanent investment—a view with which the stockholders of Webb & Knapp doubtless agree.

We have had many discussions on debt and the money markets, beginning with Art Smith’s “Public and Private Debt in the U.S.”, back in September 1949. But, strangely enough, we have had only one speaker discussing the stock market, Mark Schraeder of Distributors Group, in January 1960.

Usually we have gone outside our own membership for speakers. This choice doubtless reflects the feeling that a prophet is not without honor save in his own country, and also perhaps what Freud has described as the savage’s dread of incest. But occasionally we have overlooked these taboos, and called on our own members to share their wisdom with us. Prominent among these, of course, is our quondam member, Bob Roosa, who first spoke to us at some unrecorded date before 1951, as an economist at the New York Fed, on “European Developments”, and most recently, in November 1965, as a partner of Brown Brothers Harriman & Co., on the liquidity debate. In the years between, while busy making those brilliant swap arrangements which have long averted the dollar crisis, Bob still remembered old friends and came back from time to time to discuss various recondite financial topics.

There are other members, former members, and members emeriti on whom we have called, but probably none has been commandeered more often than Bob Johnson, who has just left Western Electric under early retirement and is currently working on manpower problems for the Air Force. At various times Bob has personally talked to us on materials controls in the Korean crisis, operations research, and input-output, and at other times arranged stimulating talks by outside speakers. Time does not permit even listing other members who have served as speakers one or more times over the years, but we should perhaps refer to a talk in May 1950, by Til Gaines on Agricultural Policy. Til has since moved on to other areas, and what he is concerned with out in Chicago now, to coin a phrase, ain’t hay.

In some cases, time has reduced the relevance of topics once eagerly discussed at our meetings. There is a certain warm nostalgia in seeing that back in 1950 or before—the records are not clear as to the date—Paul Beran of the New York Fed addressed us on that once vital question: “The Dollar Gap”.

Or again, Edna Ehrlich, back in those misty days, considering the question as to whether the Chinese Reds were Communists or agrarian reformers. This was a hotly debated topic in those days; now, of course, we know they are really long-distance swimmers.

Titles, by themselves, may be interesting, and among titles special mention should be made of the witty talk in September 1966, by member Mike West of the Economist, on “The Crisis”. This is the kind of title to reassure anybody scheduling a talk —you know it will be appropriate, and it always leaves the speaker the option of choosing which one.

Perhaps an even more flexible title was that used by Alexander Sachs on October 7, 1959: "Economic Implications of the International Situation”. It Is just conceivable that there might be a time without a crisis, but the international situation is always with us, like the poor, and it always has economic implications.

Dr. Sachs opened his talk with a few lines that are worth remembering:
“We live in a barrage of news, obsolete before it is printed. An incessant concern with disembodied data, fissionized facts obscures our understanding of events. We must try to organize our knowledge of the past into a workable hypothesis of the future. We do not need more information but a better organization of things already known.”

The general concern of most of us is with the U.S. economy; some of us are even so parochial as to be concerned with a single industry, like telephones, or insurance, or even paper. Nevertheless, Dr. Sachs was not our first speaker on the international situation, nor our last.

We have often presented discussions on foreign topics, both by American experts and, when we were fortunate enough to get them, by distinguished foreign visitors. From Geoffrey Bell of the British Embassy in May of this year back to our early discussion of the dollar gap and the Chinese Communists, our program has included topics girdling the world.

Some of these old topics have a current if not an ominous ring. In September 1956, Charles Issawi of Columbia discussed “Economic Factors in the Middle East Crisis.” In 1955, on December 7, a somewhat unpropitious choice of dates, Frank Schiff spoke on a recent trip to Vietnam. In March 1951, Phil Glaessner spoke on Cuba.

For two or three years some time back, I had the pleasure—and it really was a pleasure, as well as a headache—of being chairman of the Program Committee. At the inspired separate suggestions of Eleanor Daniel, Barbara Feinn, and Morris Cohen, the Program Committee took to meeting at Luchow’s. The warm gemutlichkeit of this oasis in the limbo of Fourteenth Street prompted regular attendance, great ideas for speakers, and stimulating wide-ranging discussion, very much along the lines of the early days of DELG itself. Our discussions were not entirely concerned with economics. Lou Winnick, then with the New York City Housing and Redevelopment Board, told us of a puzzling dream that said, "There’s a Ford in your future” but the dream object looked more like a corset than an automobile. Subsequently, of course, we all realized that it was not a corset but a foundation garment. (Actually, l just made that up.)

Bob Kavesh once arrived to tell us of seeing a sign “Keep Fourteenth Street green—bring money”. And Ken Wright told us the results of a personal survey: his young son had been given a baby alligator; since more people had mentioned the story of the cleaning woman and the alligator in the bathtub than mentioned Professor Twist, he concluded that Dorothy Parker was better known than Ogden Nash.

After each meeting Barbara Feinn and Eleanor Daniel would adjourn to Klein’s across the street. When the Program Committee stopped meeting at Luchow’s, Klein’s had to move out to Westchester to make up for declining markets.

Dave Blank, Don Field, and Al Sommers were other stalwart members of this group. In thanking all the members of this Committee for valiant service, l am really expressing the obligation of the Downtown Economists to all the Program Committees which have provided us with stimulating speakers on important topics over the past twenty years.

Our concern tonight is with remembrance of things past, but even in this warm nostalgic glow, it may be useful to look ahead, to suggest certain speakers and topics we d like for the future. For instance, somebody from the CEA should discuss rewriting labor’s songs, and tell of that rousing anthem "3.6 — no 3.2 — forever, for the Guideposts make us strong." It is even possible that Bill Martin himself would elaborate on what might be called the San Francisco thesis: if a topless waitress provokes interest, why not a backless dollar?

Speaking of songs, we might get a revival of that 1930’s hit:
"Let the pound go up, let the franc go up 
Let the mark go up as well
Uncle Sam will be in heaven
When the dollar goes to hell.”
And of course any time he is available, it will certainly be appropriate to get Mike West back to talk to us on The Crisis.

by Madeline McWhinney, 1988

When Gene Sherman asked me to prepare a history of the Downtown Economists’ second 20 years, I knew I could not compete with the erudite and witty papers written by Bob Lewis and Bob Schultz to commemorate the first 20 years. But I thought it would be a relatively easy job to pull together the highlights of the Group's activities from 1968 to 1988. But I was wrong. I should have known better than to make a rash promise without doing a little research first.

In its early years, the founders of the DELG ran it in a very undemocratic fashion. We kept tight control over its activities, on who should be allowed to join, and even who should be allowed to stay. In the process we kept pretty good records of the Group’s activities. But as the second decade came to a close, the parental grasp was released, and, in its new-found freedom, the Group virtually stopped keeping records. The Conference Board Library, where I went first seeking records, had about four linear feet of DELG miscellanea, but not enough solid information to prepare this report. So I sent out an SOS. No one had complete files, but the responses enabled me, bit by bit, to compile a list of officers from the beginning to the present, and to obtain some insights on membership and programs.

MEMBERSHIP. Among the random snapshots on membership a which were sent to me was a report prepared by Bob Lewis in 1978. Based on that report and on the December 5, 1988 membership directory, I was able to determine that 13 people have been members for at least 33 years and that three of the current members go back to the beginning. It was also evident that despite some recent pronouncements by brash young economists that cycles no longer exist, they do for DELG membership. In 1959, Chairman Jack Gude was disturbed by falling attendance at meetings. So he appointed a Special Committee to investigate the problem. The Special Committee recommended that the dues be raised, the deadwood be kicked out, the membership ceiling be raised to 60, and that a recruiting drive be undertaken. The prescription worked wonders, and the next available records indicate a strong, active and substantially larger Group.

In 1965, by which time the ceiling had been raised to 75, we divided the membership into four classes —Resident, Associate (some of the original members were a little upset by that designation, but they adjusted to it), Nonresident, and Emeritus. The Emeritus title was proof we were growing older. In 1981, the membership ceiling was raised to 125, but I do not know how or when we got to 155, where we are today.

In the 1970s and early 1980s, in order to maintain a membership that was “knowledgeable and responsible”, and one in which everyone knew each other well enough to speak freely at meetings, especially the outlook sessions, the Group adopted a requirement that members attend a minimum of four luncheons and one dinner meeting each year. This rule, as I recall, grew out of a couple of embarrassing situations where the speaker’s comments, which were clearly understood to be off the record, appeared as headline stories in the financial press the following morning. That attendance requirement was strictly policed for quite a while. In fact, the most complete records that I found for the second 20 years of DELG history were the attendance records kept to enforce that rule.

But as we moved into the middle 1980s, the resolve weakened. As Gene Sherman’s letter to members last November indicated, attendance had once again fallen. We had reached a new nadir. It was a long cycle—30 years. l don t know whether or not Jack Gude’s therapy is to be applied this time, but an upsurge and a new cycle are clearly in the cards.

PROGRAMS. With the help I received I was also able to reconstruct a list of all programs for the years 1974 through 1988. During those 14 years only two programs had to be canceled, one for a subway strike, and one for Mr. Gorbachev. But the list of programs for the years 1968 through 1973 had apparently long since become recycled paper. No one had anything on them. Even the name of the program chairman for a good part of that period is a mystery.

The extant records, however, provide a good picture of what our primary interests have been. They also give some indication of what the most pressing current economic problems were or are. Fifty-five meetings, or about 35 percent of the total during the years 1974-88, were devoted to the current economic outlook, prospects for inflation, stagflation (remember that word?), interest rates, or current capital expenditures. Four additional sessions were devoted to monetary policy. I remember one outlook session in which we thought we would try for a different perspective. Til Gaines, the perennial optimist, and Bob Lewis, the perennial pessimist, were asked to analyze the outlook from opposite points of view—Til to concentrate on the negatives and Bob on the positives. Then they were to forecast the GNP on the basis of their presentations. Til’s figure was considerably higher than Bob’s.

The next most popular subject for discussion, about 15 percent of the total, concerned the trade deficit, the value of the dollar, and other foreign exchange issues. In addition, five programs dealt with other international topics, such as economic developments in Great Britain and South East Asia. We have also had two programs on LDC’s.

Six sessions have been devoted to the Federal debt and the deficit. In one of those some years ago, when Paul Volcker was at the Treasury Department, he and Henry Kaufman, in their best Gilbert and Sullivan mode, decided the way to approach the deficit was to sell the Navy’s ships (a number of which happened to be in the New York harbor at the time) to commercial banks, and then lease them back. Each ship would display a prominent plaque indicating that it was the property of Manufacturers Hanover, Bankers Trust, or whatever. Looking back I am not so sure banks would have been a good bet. But today I suspect Donald Trump would love to have his name on the world’s biggest aircraft carrier and maybe a battleship or two.

We have had six programs on oil and energy issues, five on housing, although the most recent of those was in 1983, and during the 1970s, three programs on New York City’s fiscal crisis. I was surprised to find that we have had only two meetings during this period devoted to tax policies, and neither of them recently. We have had single meetings on a wide variety of topics including the track record of economic forecasters, regulatory reform, the steel industry, productivity, unemployment, portfolio insurance, defense spending, and recently, the impact of post retirement medical costs on corporate profits.

SPEAKERS. Carrying forward a tradition from the early days of the Group, the majority of our speakers has come from our own membership or our close associates. Classified another way, by employer rather than membership or profession, we have had as speakers 37 academicians or members of research organizations such as the Conference Board or Brookings, 34 investment bankers, 23 economic consultants, 21 commercial bankers, and 15 employees of international corporations. In addition, we have had 11 governors, presidents, or other high Federal Reserve officials, and 11 other U. S government officials. Seven of our speakers have been journalists, five congressional staffers or representatives of trade associations, two foreign diplomats, one portfolio manager, and one IM official.

Over the past 20 years many of the Group’s members have soared to the top of their fields, and we have spread out. Not only are we now north of Canal Street, but we are in London, Tokyo, Washington, South Carolina, California, Colorado, and Vermont. As we start the third 20 years of history we are in the process of becoming a bona fide nonprofit corporation, not just a group of economists, and we will thereby avoid sales taxes. I don’t think this will change the character of the Group, but I do wonder how the 60-year historian will compile the record. I have a feeling it may be lost in a computer somewhere.