Crisis on Wall Street

Behind The News
September 16, 2008 12:52:23 PM PDT
For anyone who still thinks that the New York Metro area is the same as the rest of the country, today's upheaval on Wall Street should prove, once again, that it's not. Not by a long shot. We already have a City where if you make under $175,000-$200,000, you qualify for rent stabilized housing. In nearly every other city -- and I'm this-close to saying in no other city - would you live like anything but royalty at that salary. In some parts of New York City, you're barely middle class.

But I digress.

Today's collapse of some financial giants has been a long time coming. The irresponsible risk-taking is coming home to roost. We've seen it with the unfortunate folks who have lost their homes through foreclosure, either by unwisely over-extending themselves financially, or being sold a bill of goods for their mortgages, or both.

I'm not being hard-hearted; there are many fine people who work for these investment giants -- Merrill Lynch and Lehman Brothers -- who have now lost just about everything; their retirement, their kids' college savings, their lifestyles, everything.

They walk among us on the sidewalks of New York; they're our neighbors, and the parents of our kids' classmates; they're next to you at a restaurant or in the grocery store line or at the ATM. And they account for a huge chunk of the budgets of both New York City and New York State. They also account, each of them, for as many as three other jobs in a stunning multiplier effect that we will soon feel in a painful way.

And so how does and should government respond? It's a fascinating dilemma for a society that prides itself on the capitalist creed of risk and reward, and of economic Darwinism. We've already bailed out Fannie Mae and Freddie Mac. Is it a contradiction for these supposed free-market proponents?

And what's next? Washington Mutual, the nation's largest S&L, is in trouble, with its stock hovering about $2 a share. What does it mean for the people who work there, and, most importantly, for the people who have their money and mortgages there?

And what happens to New York? Today, Mayor Bloomberg trying to put spin on the chaos. "The City is as well-positioned as it has ever been to handle turmoil on Wall St," he said. And is that why there's now a $2 billion budget deficit projected for 2010? Wonder if the Mayor would like back the $400 per household property tax rebate he so insistently pushed through?

Perhaps the City would be even better positioned to handle the turmoil.

Tonight at 11, we'll have the latest on the problems in the financial markets, and what the Chinese call the Fanshen (revolution) that's taking place before our eyes in the industry.

We're also in Texas, as the devastation continues to unfold from Hurricane Ike. Houston remains a city that in large part is uninhabitable. And the Galveston area - well, if you've seen the pictures, you know.

Eyewitness News has two reporters in the Gulf - N.J. Burkett and Jim Dolan. Both will report tonight for us, at 11.

We'll also have any breaking news of the night, plus Lee Goldberg's AccuWeather forecast, and Scott Clark with the night's sports. I hope you can join Liz Cho and me, tonight at 11.