Goldman Sachs. AIG. Bank of America. For years, Americans have been looking for a way to punish the titans of Wall Street ... to hurt them the way they hurt us. Now I think I've found it.
Make them testify before Pittsburgh City Council.
That's what happened to Perry Offut and Bill Daley Jr., two hapless Morgan Stanley executives who on March 10 were trapped before council for the better part of a four-hour meeting. ("I'll bet they missed a flight back home," one councilor later cackled.)
The execs were there because the day before, Council President Darlene Harris proposed that council educate itself about the value of public-owned parking facilities -- before Mayor Luke Ravenstahl leases them off.
Pittsburgh is facing a state-imposed deadline to put roughly $200 million into its cash-strapped pension fund by November. Ravenstahl has proposed raising that money by leasing parking garages for the next 50 years; Morgan Stanley stands to earn at least $3 million if that happens.
Harris proposed that council hire its own consultants, who could put a value on the garages, and study other potential solutions to the pension headache. That would let council be an informed investor ... you know, like the financial-service ads on TV keep telling us to be.
But while Offut agreed that "more information is better," he urged council not to go too far out of its way to find it. Ravenstahl and the city's Parking Authority had already hired advisers, he pointed out. For council to go its own way "could impact the value we're trying to achieve." Because, see, a "parallel process can lead investors to think twice about how much effort to put into this."
It might have the same effect on con men, of course. But to be fair, Morgan Stanley is just one of a handful of advisers Ravenstahl and the Parking Authority have hired. Offut suggested that it might be more efficient for council to consult their expertise instead.
The problem is that those other firms seem sold on the lease idea, too. In a report compiled by another consultant, Scott Balice Strategies, only two sentences were devoted to a solution that didn't involve privatization. (The option was "an attractive back-up scenario," the firm opined, but it faced "significant challenges.")
Council won't see a proposed lease until late summer or early fall. And as Councilor Patrick Dowd put it, "Come November, people will say, 'You don't have enough time to do the study'" on the deal's merits. Council would have to make an up-or-down vote ... and voting no could mean massive tax increases.
In the financial markets, there's a word for customers who rush into deals they don't fully understand, and put themselves in situations where they have little leverage. That word is "sucker."
I don't want to sound cynical: Offut and Daley seemed like nice, smart fellows. But perhaps the single biggest loser in the entire subprime-mortgage mess was a Morgan Stanley employee named Howie Hubler. He lost nearly $10 billion. I'll bet he was a nice, smart fellow, too.
What's more, as city councilors pointed out, Morgan Stanley actually owns leases on parking facilities in Chicago. And that deal has been a disaster: Chicago's legislators had only three days to review the proposed agreement, and the result has been a quadrupling of parking costs.
You can't blame Offut for that; he works for a different branch of the company. But let's face it: Government officials hardly need Morgan Stanley to raise parking fees. Raising fees is one of the few things our government does well.
In fact, Councilor Bruce Kraus asserted, given Morgan Stanley's performance in Chicago, relying on its advice in Pittsburgh would be like hiring "the fabricators of the Titanic to assist the city in designing a luxury liner."
At the end of the day, only Councilor Ricky Burgess opposed Harris' measure. Doing due diligence "abrogates our responsibility," he warned -- because it threatens to "lessen the amount of money that we will potentially get from this deal." And if taxes are raised, "poorer communities are going to most suffer." It's the new trickle-down -- you can't help the poor unless the rich can help themselves.
"If a market is fearful of an honest dialogue," countered Bill Peduto, "then there's something very wrong with that deal."
Just don't let them hear you talk that way on Wall Street, Mr. Peduto. No one would buy a credit-default swap ever again.