Move over NYC

From the NY Yimby:

North Jersey Builds a Lot of Housing, and Here’s How They Do It

The pace of new residential construction is picking up in New York City, but it’s the west side of the Hudson that is undergoing the region’s most dramatic building boom.

On a per-capita basis, Hudson County and Bergen County in New Jersey have issued far more building permits than the five boroughs over the past several years, thanks to strong market demand, significantly lower construction costs, and a willingness of some New Jersey municipalities to seek out and plan for dense, transit-oriented development.

Consider that since January of 2012, nearly 15,000 new building permits were issued in Brooklyn. But if the borough had issued the same number of permits as Hudson County, on a per capita basis, there would have been almost 37,000 permits issued in Brooklyn over that time.

“Many communities in New Jersey that do have access to transit have been very pro-active about zoning for mixed use, higher density, transit-village appropriate development,” said Courtenay Mercer of the Regional Plan Association. “A lot of them recognize this as a great way to promote economic development.”

Brian Stolar of the Pinnacle Companies, a developer active in northern New Jersey, says that many cities want to take advantage of market trends favoring urban living.

“Some of the municipalities are recognizing that one, it’s a trend you don’t want to get in the way of, and secondly it is good for their own proceeds as a source of revenue.”

While a lot of new development is planned for Jersey City and the “Gold Coast,” there is also a lot of recent activity in cities and towns further inland, like Secaucus, Lyndhurst, the City of Orange, Harrison and Newark. Developers are reacting to strong market demand and are also attracted by lower construction costs than what they would pay in the five boroughs.

“This is a widespread phenomenon outside of the Gold Coast,” said Tim Evans of New Jersey Future, a non-profit group that advocates for transit-oriented development in the state. “It’s a real thing. It’s not just the cities – it’s the older towns.”

But even the market-rate housing in many New Jersey communities is affordable by New York standards. New condos in Jersey City and Hoboken can be found for between $500 and $700 a square foot. Comparable condos in Long Island City and downtown Brooklyn, on the other hand, are asking between $900 and $1,000 per square foot.

This value is attracting migrants from New York City, though a large number of New Jersey residents are also moving to the five boroughs. About 7,700 New York City residents moved to Hudson County in 2012, according to Census data, while 5,500 people from Hudson County moved to New York. In the case of Bergen County, more people moved to New York City than made the reverse migration.

This entry was posted in Demographics, Economics, New Development, New Jersey Real Estate. Bookmark the permalink.

70 Responses to Move over NYC

  1. grim says:

    Had a really interesting conversation over the weekend about the interplay of younger generations finding new jobs, or moving up the career ladder along side the boomers inability (or unwillingness) to retire. We’ve touched on this before, and it’s all a very straightforward argument. The interesting twist though, is that this is an unintended consequence of raising the retirement age. Was perusing the news flow this morning and came across this piece, from MarketWatch:

    Older workers clog the employment pipeline

    Don’t expect the trend toward retiring at older ages to stop any time soon.

    That’s the conclusion of a new survey of over 4,200 full-time U.S. workers by consulting firm TowersWatson. On the whole, the survey is pessimistic about the trend, which in today’s lackluster job market is impeding job “opportunities for the young.” It also has a downside for employers: Many people who are delaying retirement are less healthy, more stressed, and more likely to be disengaged from their jobs, according to the survey.

    “The concern for employers is that this creates a productivity drag,” says Steve Nyce, a senior economist at TowersWatson.

    First, the specifics. According to Census Bureau data, labor force participation rates for older men have risen steadily over the past 25 years. Among men ages 65 and over, for example, 24% are now in the workforce, up from 17% in 1990. For those ages 55 to 64, 70% have jobs or are looking for work, up from 67% in 1990. Meanwhile, younger men are experiencing the opposite: For 25 to 54 year olds, labor force participation rates have declined from 93% in 1990 to 88% today. (The trends for women are the same.)

    Why the reversal? One factor has to do with big changes in retirement benefits. Since 1990, the percentage of employers offering defined benefit pension plans to new employees has declined to 24% from 60%, according to TowersWatson. As a result, the “generous early retirement subsidies” these plans typically offered are a thing of the past. At the same time, the rise of the 401(k), which puts the onus on employees to save, has contributed to retirement savings shortfalls that are pressuring people to work longer.

    Changes in Social Security have also had an impact. Specifically, the so-called full retirement age, at which beneficiaries are eligible to take 100% of their benefits, has risen steadily from 65 to 67 for those born between 1938 and 1960. Then there’s the spread of knowledge- and technology-based jobs, which make it possible for people to continue to work well past the age at which many coal miners and assembly-line workers retire.

    The trend is unlikely to reverse any time soon, the survey says. In 2013, 43% of full-time employees reported that the age at which they plan to retire has increased over the past three years—up from 34% who said the same in 2009. Moreover, “nearly three-quarters of those delaying retirement are planning a delay of three or more years.”

    Overall, half of the survey’s respondents say they plan to retire after age 65—up nine percentage points from 2009. And over 30% plan to retire at 70 or beyond.

    Yet another problem for employers? Because older workers aren’t moving on, they can’t hire the younger workers they will inevitably need as replacements. Until the job market and the economy improve, the survey says, “retirement delays among older workers” will “impede opportunities for the young, as fewer new jobs open up to replace retiring employees.” According to TowersWatson, 34% of survey respondents under 40 “believe that retirement delays among older workers are restricting their career opportunities.”

  2. Comrade Nom Deplume, a.k.a. Captain Justice says:

    [1] grim,

    I agree that it was unintended but it wasn’t unknown. I think the real unintended part was that no one thought it would be as impactful as it is.

    There were always the larger media discussions about the prospect of older workers not moving out but working later into retirement years. This is an old issue, one that I recall as far back as the 80s.

    The idea that older workers not leaving meant space wouldn’t be available for younger workers was discussed however it was always dismissed as something that wouldn’t move the needle. I got the impression that people thought it would resolve itself or, as still seems to be the case, it would resolve itself when the boomers died off. I am guessing that the realization now isn’t that this occurs but that is is actually having an impact. That seems to be the part no one expected.

    It also suggests a Buffettesque profitability argument for domestic companies. Once they shed their higher priced employees and replace them with younger employees that work for less, profits will soar. May take years but it will happen. But once the boomers have fully left the market, then you see wage pressure again. So Michael may be right but I think he is about 25 years too early.

    In a related vein, did anyone hear this? Thornley is now being castigated for saying what everyone else had been thinking, and doing, for decades.

    http://www.theage.com.au/it-pro/business-it/evan-thornley-causes-stir-with-sexist-comments-at-sunrise-startup-conference-20140922-10kiku.html

  3. anon (the good one) says:

    old farts can and should retire
    poverty rates are highest on the very young. young need jobs and livable minimum wage

    @EricKlinenberg:
    For older people, poverty rate down from 35% in 1950s to 10% or so today. Social Security is crucial. #NewsHourChats

  4. grim says:

    3 – NJ raised the minimum wage on January 1st, we’re now 3 quarters in. What’s the impact? Positive or negative? In 3 months it will go up by 1.59%, what will be the impact?

    I just read a piece this morning that indicated that the increase in NJ’s minimum wage was a failure, poverty continues to increase in NJ. What’s the solution? Raise it even more.

  5. 1987 Condo says:

    #2…was just going to add that this was being discussed in early mid 80’s as well. I am still waiting!!

  6. jj says:

    Problem with old farts retiring is the young farts wont let them. I got three kids from 7-14 and a stay at home wife. Most of my friends got married much later in life then our parents and grandparents generation. We also have higher expectations from our kids.

    In America 50 years ago kids went off to war, got a full time job or college at 18 never to return home. Folks were done having kids by 30. Parents were not expected to pay for college or buy a kid a car and no trade up homes. By 50 they were empty nesters, mortgage paid off, two good used cars in driveway of their little cape and had a union pension and soon started thinking about retirement plans.

    Here I sit in a corner office. But when am I leaving. Well do the math. When my youngest graduates college in 15 years.

    Normally folks job hop to get ahead. But folks over 45 who already did 3-6 job hops have run out of places to hop to and the age, salary and level makes it difficult. So they dont hop.

    I could retire right now according to my 401k. But new cars, vacations to Beaches, home improvements, three colleges to pay for, braces, weddings etc. are something at my age no male head of household has ever had to deal with in past generations.

    If I got married at 21, had kids at 23, 25, 27 to a 19 year old bride like prior generations did guess what I could retire soon.

    But the kids aged 21-32 who complain boomers wont get out of way should look in the mirror, their demands for parental help till 30 are forcing parents to stay in workforce 12 years longer. Dude get out your dads family plan cell phone account you are 40!

  7. Zero sum game, mf’ers. This all ends in tears.

  8. 1987 Condo says:

    #7….it has always ended the same way for all people everywhere….hopefully you are fortunate (lucky mostly) enough to not have a horrendous life and that maybe you can do a little good while here….

  9. Fast Eddie says:

    In the case of Bergen County, more people moved to New York City than made the reverse migration.

    See, my issue is I view these outlaying suburbs as I remember them as a kid, not as they are today. Bergen County is becoming the new Staten Island; gaudy, audacious, over-priced and over-rated. And dirty. They’re still using the same sales tactics and milking the cow until death. At one time, these towns did have prestige and exclusivity.

    The truth is, the whole county, even the haughty parts are becoming a front and a fraudulent shell of what made those places desirable at one time. The bloom is off the rose. The odds are becoming greater by the day that I’ll just stay where I am.

  10. chicagofinance says:

    flabmax: I guess it wasn’t clear that I was making a joke on Friday. Go back and read it.

    Regardless, I think what you should consider (which I doubt you will ever do, because the idea of good faith discussion is beyond you) is that I don’t care about large corporate agendas and their suffocating codes of conduct. We were on these threads several days ago deriding annuities and other predatory practices of my peer group. Who do you think sells these things? Corporations, with their revenue forecasts and margins to defend, essentially extort people in my position with a very clear mandate. So instead of looking at my choice and applauding me, you instead state that I don’t have the ability to work there………or more importantly, YOU are a sellout and a hypocrite, and enrich yourself while deriding the system that allows you to make the money. That must eat at you every day of your life.

    Also, I already explained my position on these threads. You appear to have a convenient case of amnesia.

    Fabius Maximus says:
    October 4, 2014 at 11:40 am
    #30 Chi (Previous thread)
    I don’t know if you bosses frequent in here. I would expect not as some of your posts would get you fired in other firms. The way you have railed on about your current and prospective clients is disgraceful. You are free to have those opinions, but not verbalize them in a public forum where you are an ambassador for your firm. That is one of the reasons I would never send anyone to you. I have a lot of co-workers were the US is a 3-10yr gig for them. They go home with a chunk of change from selling the house they bought, stock plans savings etc. I had one kid that just dropped $200K into QQQ in an eTrade account and got on a plane back to India. Do I really want to send him down to you to have him ridiculed in here the next day?
    You will never get a job at a big firm as a background search will always link you here and you’ll get flagged as not worth the HR hassle.
    It doesn’t really bother me that you call me an as$hole. Been called worse by better. I’ll just sit back and watch you continue to burn your brand with your own posts.

  11. 1987 Condo says:

    #9..you hurt me with the Staten Island comment, may be true, but hurts. I moved to “North” Jersey because most SI’ers moved to Hazlet, Middletown, Jackson….but I guess the influence expands!! Apparently I can run but not hide!

  12. Fast Eddie says:

    1987 Condo,

    I had relatives in Staten Island and at one time it was a beautiful place. Let’s be honest here. I went to Arthur Avenue over the weekend in the Bronx and the Italian section is run by Albanians and Mexicans. Who are we trying to kid?

  13. Comrade Nom Deplume, a.k.a. Captain Justice says:

    [10] chifi

    Much as I hate to give him any props at all, he has a somewhat legitimate point re: brand.

    It is part of the reason I refuse to engage him (and a few others) as he (they) would like. I wonder if that ever occurred to them?

  14. Fast Eddie says:

    A realtor sent me a link to a house in Wash. Twp. It was a 3/2 split for $599,000. It was a box on property that looked like sh1t. The inside had green and gold rugs and you know the rest of the story. I emailed her and asked her why she would even send it knowing that it has nothing of value. She said, “I know. I don’t know what to do. 20 years in the business and this is the worst that I’ve seen it. I have absolutely nothing spectacular”

    So, over-priced sh1t rules the day and as long as one s.ucker bites, the cycle continues. Why would anyone who knows how to make and invest money waste it so foolishly? For $600,000, you should be able to make a statement with your purchase. Otherwise, you got used and swindled beyond belief.

  15. Ragnar says:

    Wait, I thought the president’s flacks say that the reason people shouldn’t care about rising labor non-participation rate over the past 6 years is that so many people are retiring.

    The best way to “create jobs” is to make the US a relatively more attractive place in which to invest and do business. Which generally means, getting government regulations and taxes out of the way of productive enterprise. Over the past 6 years (and probably 20 years), the government has been doing the opposite, coasting on past competitiveness while other countries improved their relative competitiveness to the US. What little improvement that has come has been due to a natural reversion to the mean post credit crisis, coupled with 6 years of “emergency” monetary policy, that mostly bailed out and steered the wealth to JJs gang. And no, the solution isn’t more government spending on education and infrastructure (though overall spending to both could deserve to rise, government is the worst channel through which it should flow).

  16. grim says:

    Whoever posted the Zero Hedge piece on hiring grandparents needs to spend a little bit more time looking at the methodology, and the fact that they looked at a single month snapshot, and not a full year picture.

    First, realize that the BLS age ranges are not equal breakdowns, the age rages differ dramatically in the detailed data, for example, there is a 16-17 group, and an 18-19 group, both groups consist of only two years data. Now, moving up, 25-34 group, this is 10 years worth of people. Then the top tier, which is 55+, is a special kind of problem, it’s a top coding kind of problem where you have a disproportionately large population in a single tier, which isn’t helpful in categorizing. Assuming we look at this as 55-67, it’s at least a 13 year group of people, or if we look at it based on life expectancy, it could potentially be 20+ years. Given the population of the boomers, this is a big group.

    Now, if we look year over year, unadjusted, which everyone knows is my favorite metric to look at, since it eliminates month to month noise, eliminates fancy pants seasonality math, and includes a large enough set of data to not be volatile, you get something that looks like the following.

    I’ve normalized the tiers to be “per year” of population, so for example, the 16-17 group was up by 1.58% YOY, but I divided by the number of years in that group to get the % increase or decrease for each specific age.

    16-17 Up .79%
    18-19 Down 1.38%
    20-24 Up 0.17%
    25-34 Up 0.24%
    35-44 Up 0.09%
    45-55 Up 0.02%

    Now looking at 55+ two ways

    55-67 Up 0.27%
    55-78 Up 0.15%

    Now, if we adjust this by population, we’re going to get another story entirely that is going to minimize the growth of the 55+ group, since they are a large overall % of working Americans by population.

  17. Comrade Nom Deplume, a.k.a. Captain Justice says:

    [15] ragnar,

    “The best way to “create jobs” is to make the US a relatively more attractive place in which to invest and do business. Which generally means, getting government regulations and taxes out of the way of productive enterprise. ”

    Bill Clinton has been preaching the same mantra. The Obama/Warren wing has developed waxy fingertips from this.

  18. Comrade Nom Deplume, a.k.a. Captain Justice says:

    SCOTUS refuses to grant cert in gay marriage appeals.

    Game over. Now gay people get to experience the he11 of marriage!

  19. jj says:

    Only different between a straight and gay marriage is in a gay marriage the bride cant wear white as it shows the poop stains to easy

    Comrade Nom Deplume, a.k.a. Captain Justice says:

    October 6, 2014 at 10:00 am

    SCOTUS refuses to grant cert in gay marriage appeals.

    Game over. Now gay people get to experience the he11 of marriage!

  20. chicagofinance says:

    There is no branding here. Ten years into my career, the combined amount of everything I have sourced cold from the internet has amounted to under $100,000. It is not a useless channel, but it is certainly a highly inefficient place to find prospects, and further the ones that exist suffer from adverse selection……they are searching on the internet because the want something for free….

    Comrade Nom Deplume, a.k.a. Captain Justice says:
    October 6, 2014 at 9:14 am
    [10] chifi Much as I hate to give him any props at all, he has a somewhat legitimate point re: brand.

    It is part of the reason I refuse to engage him (and a few others) as he (they) would like. I wonder if that ever occurred to them?

  21. chicagofinance says:

    My brother-in-law was married over the weekend to “Josh”. I would rate it a better wedding with more well adjusted people than the assembly line garbage of recent vintage that I have had to tolerate.

    jj says: October 6, 2014 at 10:16 am
    Only different between a straight and gay marriage is in a gay marriage the bride cant wear white as it shows the poop stains to easy

  22. chicagofinance says:

    grim: are you going to celebrate ONE DECADE online next September?

  23. chicagofinance says:

    Need info on residential construction loans……

    Opinions?

  24. Ragnar says:

    I think all sorts of people should be allowed to contract into a marriage-like deal. I have no religious axe to grind over it.
    But what I find interesting in the NY Times every weekend, is that same-sex marriages are especially likely to get written up with photos. Sampling from the NY Times, I’d be estimating 25% of people getting married are same-sex.

  25. Comrade Nom Deplume, a.k.a. Captain Justice says:

    [23] grim,

    Better yet, when are you going to cash in?

    http://www.cnn.com/2014/10/01/world/europe/bloggers-six-figure-salaries/index.html?hpt=hp_c3

    Hell, these days you can practically kickstarter an initial offering.

  26. Comrade Nom Deplume, a.k.a. Captain Justice says:

    [25] ragnar,

    They are the only people still buying the paper.

  27. grim says:

    22 – Load of crap, there is some political jawboning going on here.

    Why would you attempt to refinance a 4.25% in the current environment? At no point in the last full year would it have ever made financial sense to do so.

    Even if he had caught the lowest in the past year, 4.1%, he would have a 115 month break even, why bother?

    Something’s fishy, don’t believe it.

  28. Ragnar says:

    BTW,
    I don’t actually pay for the NY Times. It’s been arriving Sat and Sunday ever since I moved into my house 4 years ago. The former owner was an ultra-Democrat, so I suspect the NY Times may have once offered NY Times on weekends for a lifetime?
    Anyone heard of that?

    Unsurprisingly, neighbors tell me she was a mega-mean-bitch in person, and never even ventured into her back yard in her 18 years at the house. She also left a ton of disgusting modern art books. Not 3rotic, just ugly as all hell, tons of books showing and analyzing poop smears on canvas. I had to donate them to the library.

  29. Xolepa says:

    (25) Most of the time the parents put in the announcements. I don’t think I would put one in such a paper (rag) where the chances are the kids would be placed next to photos of Ken and Barbarian.

  30. jj says:

    Josh – Jump On Sh1T Hole

    chicagofinance says:

    October 6, 2014 at 10:55 am

    My brother-in-law was married over the weekend to “Josh”. I would rate it a better wedding with more well adjusted people than the assembly line garbage of recent vintage that I have had to tolerate.

    jj says: October 6, 2014 at 10:16 am
    Only different between a straight and gay marriage is in a gay marriage the bride cant wear white as it shows the poop stains to easy

  31. Comrade Nom Deplume, a.k.a. Captain Justice says:

    Final contribution for today. Interesting map showing charitable giving in the U.S.

    http://fm.cnbc.com/applications/cnbc.com/resources/editorialfiles/2014/10/06/Map.pdf

    I thought the inclusion of election results was a nice touch. I suspect that most giving is church-related hence the breakdown.

  32. nwnj says:

    jj

    How is that jets ticket market? It must be a bloodbath today. I’m looking for the Steelers game but will wait until the jets collapse is final. Should be another 2 weeks.

  33. The Original NJ ExPat says:

    [1] grim – Failure to Launch. I brought up this report before. The recommended solution is a break from the current binary modes to more analog modes of employment and retirement; a gradual on-ramp to full-time work and a gradual off-ramp to full retirement.

    http://cew.georgetown.edu/failuretolaunch

    For 25 to 54 year olds, labor force participation rates have declined from 93% in 1990 to 88% today. (The trends for women are the same.)

  34. jj says:

    I got two left for Jets/Broncos. That really died on Sunday night. Jets/Steelers I bet prices will fall a lot. They gave us season ticketholders a chance to buy extra seats at face for individual games. Mostly LLEZ where there are lots of defaulted PSLs.

    I had ten tickets and two parking passes to this sundays Broncos game. I sold eight tickets and the parking prior to the Sunday loss. Looks like I am selling my last pair at a loss.
    Back in Sept after Jets won opening day I sold my best pair of Broncos seasts at 440 a ticket with a 135 face. I sell last pair at a loss no big deal.
    Payment Information
    Quantity of tickets sold: 2
    Price per ticket: 440.00
    Seller fee per ticket sold: 44.00
    Amount you receive per ticket sold: 396.00
    Total Payment to you: 792.00

    Jets/Steelers I have 12 seats left. I am taking family to game as I have a four pack so I am waiting for a single to go cheap in section so I have five in that section. Seems very likely. Knowing the stupid Jets they will win this Sunday get the hope back and then lose next five games.

    I also have a connection with giants, a week one. I got two at face Giants/49ers and Giants/Redskins. May go to one game and sell the other, so far they are looking good.

    It is a fun hobby I generally have an itchy trigger finger and sell a lot ahead of time.
    nwnj says:

    October 6, 2014 at 11:51 am

    jj

    How is that jets ticket market? It must be a bloodbath today. I’m looking for the Steelers game but will wait until the jets collapse is final. Should be another 2 weeks.

  35. yome says:

    Companies will be forced to get rid of old,sickly,unproductive employees. Only reason companies are holding them is,hard to find a younger ready to tackle the job. Only 2 solutions. First is opening Immigration for people with specific job experience. This is what companies want.Cheap labor with productive employees. Second,increase salaries offered to current younger employed , to steal them from other companies. This is where Michael’s income inflation comes in. The way money is flowing from lobbyist, Immigration will be what our fuc !ng leaders will go for.

  36. The Original NJ ExPat says:

    [36] I remember back in the 80’s when the big banks in NY used to bring over a lot of Brits at much lower wages for computer programming rather than pay US programmers caught in steep wage inflation what they were worth. Same trick, different skin color.

  37. jj says:

    That only works for a certain level of management. There is a pyramid apporach to a career. Lets take public accounting in a small practice

    40 staff, 5 to supervising seniors, 2 to four managers, 1 to 2 secnior managers and one Partner.

    The staff is 22-32, the supervising seniors are 25-32, managers 32-34, senior managers 25 to 45 and the Partner is over 45. He outplayed and out manuvered maybe 100 employees to get the one Partner spot and is only leaving when he retires or gets disabled.

    Also at upper level lay-offs dont accompish much. Granted Partner makes a ton but only one to lay off. Laying off 20% of staff accomplish more and plus staff is nearly all salary, the Partner comp is heavy bonus. Just tell Partner zero raise and zero bonus and he will stay if it is just a typical recession.

    yome says:

    October 6, 2014 at 1:00 pm

    Companies will be forced to get rid of old,sickly,unproductive employees. Only reason companies are holding them is,hard to find a younger ready to tackle the job. Only 2 solutions. First is opening Immigration for people with specific job experience. This is what companies want.Cheap labor with productive employees. Second,increase salaries offered to current younger employed , to steal them from other companies. This is where Michael’s income inflation comes in. The way money is flowing from lobbyist, Immigration will be what our fuc !ng leaders will go for.

  38. jj says:

    Stronger economic growth means an exit from zero interest rates next year that accompanies this year’s exit from QE. That implies higher interest rates and a reduction in interest rate exposure to secure the gains from this year’s decline in longer maturity interest rates. How you do that matters, however. Our preference remains reducing interest rate risk through shorting the most vulnerable part of the yield curve to a Fed “normalization” cycle, namely the short end of the yield curve (2 to 3 years out to 5-7 years in maturity). We also highlight asset classes with outsized exposure to these shorter parts of the yield curve. HY and bank loans have been two sectors we have underweighted, partly due to concerns around their sensitivity to Fed “normalization”. Recent increases in yields have restored some value and tactically we move HY up to neutral. Additionally, normalization means rising “real” yields hurting the performance of TIPs, gold, and oil. TIPs relative to nominal Treasuries, however, as a result now look attractive. And with the rest of the world easing or expected to ease monetary policy more (in Europe, Japan and China), the outlook for a strong dollar undermines foreign-denominated bonds (for U.S. dollar-based investors).

  39. chicagofinance says:

    Every once in a while, the WSJ Editorial pegs it just right…..

    The financial scandal du jour involves leaked audio recordings that purport to show that regulators at the Federal Reserve Bank of New York were soft on Goldman Sachs . Say it ain’t so.

    The news is being treated as shocking by journalists who claim to be hard-headed students of financial markets. One especially impressionable columnist calls it “a jaw-dropping story about Wall Street regulation.” The real scandal here is the excessive faith that liberal journalists and politicians continue to put in financial regulation. The media pack is discovering regulatory capture—a mere 43 years after George Stigler published his landmark paper on the concept.

    The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra’s revelations were broadcast, the firm added new restrictions on employees trading for their own accounts.

    The New York Fed won against Ms. Segarra in district court, though the case is on appeal. The regulator also notes that Ms. Segarra “demanded $7 million to settle her complaint.” And last week New York Fed President William Dudley said, “We are going to keep striving to improve, but I don’t think anyone should question our motives or what we are trying to accomplish.”

    On the recordings, regulators can be heard doing what regulators do—revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been “legal but shady” in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman’s explanations without a fight.

    The sleuths at the ProPublica website, working with a crack team of investigators from public radio, also seem to think they have another smoking gun in one of Ms. Segarra’s conversations that was not recorded but was confirmed by another regulator. Ms. Segarra reports that she was shocked to hear a Goldman employee say that once clients are wealthy enough, certain consumer laws don’t apply to them. Ms. Segarra says she was told by a fellow Fed regulator after this conversation, “You didn’t hear that.”

    In this case it appears a regulator was helping Goldman even when Goldman didn’t need any help. That’s because the securities laws have long sought to provide the most protection to investors of modest means. For example, a company offering securities is exempt from some registration requirements if it is only selling to accredited investors, such as people with more than $1 million in net worth, excluding the value of primary residences.

    The journalists have also found evidence in Ms. Segarra’s recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government?

    ***

    Enter George Stigler, who published his famous essay “The Theory of Economic Regulation” in the spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago economist reported empirical data from various markets and concluded that “as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.”

    Stigler knew he was fighting an uphill battle trying to persuade his fellow academics. “The idealistic view of public regulation is deeply imbedded in professional economic thought,” he wrote. But thanks to Stigler, who would go on to win a Nobel prize, many economists have studied the operation and effects of regulation and found similar results.

    A classic example was the New York Fed’s decision to let Citigroup stash $1.2 trillion of assets—including more than $600 billion of mortgage-related securities—in off-balance-sheet vehicles before the financial crisis. That’s when Tim Geithner ran the New York Fed and Jack Lew was at Citigroup.

    Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can’t be gamed by the biggest firms and their captive bureaucrats. This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple requirement for more bank capital—an equity-to-asset ratio of perhaps 15%. It means bringing back bankruptcy for giant firms instead of resolution at the discretion of political appointees. And it means considering economist Charles Calomiris’s plan to automatically convert a portion of a bank’s debt into equity if the bank’s market value falls below a healthy level.

    Fifty years ago, Stigler described academics in a way that might also apply to much of today’s press corps: “The economic role of the state has managed to hold the attention of scholars for over two centuries without arousing their curiosity.”

  40. grim says:

    Just heard the NPR piece on that, google it, it’s worth a listen.

  41. Anon E. Moose says:

    ChiFi [40];

    Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can’t be gamed by the biggest firms and their captive bureaucrats. This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple requirement for more bank capital—an equity-to-asset ratio of perhaps 15%. It means bringing back bankruptcy for giant firms instead of resolution at the discretion of political appointees.

    About as likely as the established political class passing a flat tax (selling loopholes to tax policy being a politician’s stock and trade), or term limits. Its flatly against the interest of our rulers ex officio, regardless of political persuasion.

  42. Essex says:

    9. Grim called that three years ago, Eddie.

    6. JJ — no doubt. Excellent piece, Op Ed Worthy

  43. Juice Box says:

    Bill Black weighs in on Regulatory Capture.

    http://neweconomicperspectives.org/category/william-k-black

  44. Juice Box says:

    Also remember the legacy of our now departing AG and regulatory capture. Deferred prosecution agreement aka get out of jail for $$$. Let’s see where he ends up. Chances are he won’t be working for the NAACP even though he claims his legacy is civil rights. If there was ever a case that deserved criminal prosecution it was HSBC and this case had NOTHING to do with liar loans or ABS. HSBC bank was caught laundering money for Mexican drug cartels and Saudi Arabian and Iranian banks with ties to terrorist organizations yet Holder’s DOJ decided to settle for 2 Billion in a deferred prosecution agreement, not even a middle manager saw the inside of a cell on that one.

  45. NJCoast says:

    Grim, somebody is beating you to it.
    From the Asbury Sun:
    Downtown Asbury Park could be the home of the state’s first gin and whiskey distillery since prohibition.
    Asbury Park Distilling, LLC. submitted plans Friday to open a 4,000 square foot craft distillery at 527 Lake Ave., on the corner of Lake Avenue and Press Plaza. The distillery would be located within the same building as the soon-to-be-opened Asbury Festhalle and Biergarten, according to the plans. A wall with a glass partition could allow patrons of both businesses to see through to the other side.

  46. jj says:

    see you guys next week off to a business trip in Europe, will report back on world events when I get back

  47. Anon E. Moose says:

    Con’t [42];

    Forgot to mention what made me think that the rules are essentially self-dealing to the ruling class. You already know this, but the rules put in place privilege government bonds by reducing equity requirements. Despite their paltry returns, the banks can hold more of them by keeping less in reserve; boosting ROE to make up for the yield difference. Its therefore cheaper and easier for the gubmint to borrow, so borrow they will.

  48. Juice Box says:

    Grim when can we sample some of your MoonShine? What are you calling it?

  49. gary (9)-

    Yeah, an 18K property tax bill for a Rheingold-stinking shitbox next to the Parkway and a drug-infested, overloaded skool system definitely takes the gild off the lily of nostalgia.

    Most of these “prestigious” suburban addresses are no different than your affluent parts of Bogota or Buenos Aires. In fact, I’d rather have access to the kind of personal militia I could raise in S. America than relying on the protection of our alleged “police” and gun laws that are designed to allow criminals to overrun the law-abiding.

    “See, my issue is I view these outlaying suburbs as I remember them as a kid, not as they are today.”

  50. gary (14)-

    Four walls and a roof, peon. Nut up and get used to it.

    “For $600,000, you should be able to make a statement with your purchase.”

  51. grim (28)-

    If Bernank is running his mouth, it is dissembling at best. He is a scumsucking liar of the lowest sort.

  52. grim (41)-

    I heard the whole This American Life piece while in the PR of Ithaca. Nearly drove off the road (which in that place could mean a horrifying death plunge).

    A pox on the whole scurvy lot of those thieves.

  53. Asbury Park is like an even more fcuked up Coney Island. Why would anyone with a brain invest a nickel in that hellhole?

  54. Bitches had it coming.

  55. Comrade Nom Deplume, Much Relieved That Pats Won says:

    Geoffrey Holder<Vigoda

  56. Ci fu un applauso ogni volta che parlava. E quando,ugg shop online, finalmente, nella scena della pompa e vasca, la signora Grudden accese il fuoco blu, e tutti i membri disoccupati della società entrò,rivenditori ugg milano, e caduto giù in varie direzioni non perché che aveva qualcosa a che fare con la trama, ma in per finire con un tableau il pubblico che ha avuto in questo periodo un aumento considerevole dato sfogo a tale grido di entusiasmo, come non era stato sentito i

  57. Fabius Maximus says:

    #Chi,

    I don’t see the joke in ” Everything you say should be discredited because you are an as$hole. I don’t care the validity of your arguments.”, maybe its my European sense of humor when I put it in context with everything else you have called me here.

    I have not said anything about your technical ability, just your personality. Maybe you can get Eddie Ray to explain the brand issue you. Its a rare time we actually agree, so it shows there is an issue there for you.

    While you call me a “sellout”, (is that another one of your jokes), where do you stand on the fact that your broker/dealer is willing to sell you the very products you deride so much? Is that not hypocritical that you even deal with them?

  58. Bro’s before ho’s.

    Therefore, Chi up , gluteus down.

  59. woops, rant vs. Gooners moderated

  60. Michael says:

    Please don’t compare some of the richest locations in America to Staten Island. That’s just crazy.

    I don’t know what you expect. There is no sale tactic. They are not lying about the prestige factor, no idea why you think they are. The day places like alpine or tenafly become like Staten Island is the day I will move to Paterson. Not happening anytime soon.

    Fast Eddie says:
    October 6, 2014 at 9:06 am
    In the case of Bergen County, more people moved to New York City than made the reverse migration.

    See, my issue is I view these outlaying suburbs as I remember them as a kid, not as they are today. Bergen County is becoming the new Staten Island; gaudy, audacious, over-priced and over-rated. And dirty. They’re still using the same sales tactics and milking the cow until death. At one time, these towns did have prestige and exclusivity.

    The truth is, the whole county, even the haughty parts are becoming a front and a fraudulent shell of what made those places desirable at one time. The bloom is off the rose. The odds are becoming greater by the day that I’ll just stay where I am.

  61. Michael says:

    1- grim, great job with the write up. Was a pleasure reading it.

  62. Fabius Maximus says:

    #60 clot

    In the light of your CR7 comments earlier, that’s scares me.

    I thought you were no longer watching PL. It is funny to note that AP is now the second longest serving PL manager (can you guess the first?). The really funny part is that he will probably hold that position a lot longer. The word is that Mikey is still holding notes for the “Personal Loans”.

  63. Fabius Maximus says:

    I think Gary’s head will explode with this!

    Casa Dante (that bastion of Old School Jersey City Italian dining) is now an Indian Banquet Hall.

    Thank the IRS!

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