By Sarah Trefethen
Eliot Spitzer gave a May Day nod to Occupy Wall Street at a breakfast meeting of the Real Estate Principals Group yesterday (Tuesday), where he expressed his concerns about the political economy of the United States.
The former governor of New York linked the political discontent of the OWS and Tea Party movements to the downward pressure that global competition was putting on workers’ wages.
“You’re in the one percent,” he told his audience. “You’re in the very top of the one percent.”
General Motors employees who once worked for $35 an hour are now making $18 an hour, he said — a pay rate too low for admission to the middle class.
Spitzer, whose family’s real estate business has significant holdings in both New York and Washington, DC, said the federal government is still too hesitant govern the financial sector.
“Markets don’t work without constraints,” he said, adding later, “Banking should be boring. When banking isn’t boring, bad things happen.”
Spitzer criticized the architects of the post-2008 bailout for “the socialization of risk and the privatization of gain,” arguing that more could have been done to reduce the burden of mortgage debt still weighing down the economy.
“They confused, in my view, the financial services sector with the entirety of the economy, which is an easy thing to do here in New York,” he said.
And history could repeat itself, he said. “Everybody had all the power they needed in the run-up to the bubble to intercede, they just chose not to do it. There’s always the self-delusion that this time we’re smarter. This time we can handle the leverage” without incurring the downside costs.
Without naming any names, Spitzer warned of a “peter principal on steroids,” in which people promoted to the point of their incompetence caused the crisis, and then were further promoted.
“The same people who created the crisis are supposed to keep us out of the next one,” he said.
Regulation is cumbersome, Spitzer said, but he advocated for “simple principals,” such as the separation of commercial and investment banks.
In spite of these concerns, Spitzer said he is still bullish about New York real estate.
“There are going to be global cities that will continue to thrive, where intellectual capital will congregate,” Spitzer said. “Despite the gloomy backdrop, I think New York City is unstoppable.”