The Wrong Kind Of Business

Here in the gold coast region of Fairfield County the drive has always been to attract more Wall St and other financial businesses in favor of just about everything else. Trading was the business and Stamford, where the current governor hales from became essentially a company town for pushing tokens.  The factories and production that had made the city what it was had been driven out and the keys to the city given to the big money being made to push bigger money around. Well that could not be sustained and it hasn’t.

UBS is apparently shutting down it’s once successful trading floor.  Leaving the huge complex they built North of the Stamford train station too.

This is how UBS trading floor changed since 2008

This was a huge floor, the largest  in the world. Almost as large as a football field.  You can see the roof from the train as you go by.  The UBS complex was built in the late 1990’s as yet another one of those deals done by the state back in the 1990’s.  The lot was essentially a commercial dead zone and had been for decades.  I used to walk up through the area on my way to work in the late 1970’s

The Swiss Bank Corporation, rejecting offers of tax incentives to keep 1,500 workers in Manhattan, said yesterday that it would move 1,300 of those workers to a new office tower it planned to build in downtown Stamford, Conn.

Swiss Bank, an investment banking concern, said it would hire an additional 700 workers, bringing total employment in Stamford to 2,000 when the new building opens in 1998.

The announcement, made yesterday in Hartford, came as a blow to New York City, which has scored repeated successes in recent years in persuading companies not to leave Manhattan, largely through the use of tax breaks.

But it was a major victory for Stamford, which has been plagued by a glut of office space and has lost some of the luster, earned in the 1960’s to the early 1980’s, as one of the nation’s fastest growing business centers outside big cities.

Connecticut’s prize did not come cheaply. The state agreed to provide tax breaks that could amount to $120 million over 10 years, or $60,000 a worker, more than twice as much as New York City has ever offered in incentives.

The Connecticut tax break could grow to $165 million if Swiss Bank remains and expands in Stamford for 15 years.

“This is the largest entry of a new corporation into the State of Connecticut in my lifetime,” Gov. Lowell P. Weicker Jr. said yesterday.

With several large banking, securities and insurance companies already based in Fairfield County, he said the Swiss Bank move would make Connecticut “one of the great financial centers of the world.”

New York City officials said that they had put up a determined fight to retain Swiss Bank, one of the largest of 350 foreign-owned banks with offices in Manhattan. John Dyson, the Deputy Mayor for finance and economic development, flew to Basil, Switzerland, to meet with top executives of the bank at their international headquarters.

“The city worked very hard,” said Forest Taylor, a spokesman for Mr. Dyson. He declined to say what tax breaks the city offered to Swiss Bank.

In the past, the city and the state used tax incentives to retain Morgan Stanley & Company, Kidder, Peabody and other financial-service companies that threatened to leave.

The city has never offered packages valued at more than $25,000 per employee.

“The Mayor is being very frugal with scarce financial resources and he is not about to give away the store to any company that threatens to leave,” Mr. Taylor said.

Swiss Bank said it planned to build a 20-story tower on 11 acres next to the Stamford railroad station and Interstate 95. The land, which is partly owned by the city and has an estimated value of $5 million, is to be turned over at no cost to the bank.

The site is the same one on which Morgan Stanley had an option. That deal fell through in 1992 when the brokerage firm accepted a 10-year package of New York City tax breaks and other incentives worth $39 million and agreed to keep its headquarters and 4,100 workers in Manhattan.

Although it appeared unlikely yesterday to be a major impediment, one hurdle remains to Swiss Bank’s move to Stamford. Connecticut law prohibits foreign-owned banks from doing business in its borders.

But a bill to lift that restriction for banking concerns like Swiss Bank that are engaged mainly in investment banking, not customer deposits and lending, is expected to face little opposition in the Connecticut legislature when it is voted on at a special session next month.

The measure has the support of many in the Connecticut business community, including bankers.

“Ninety-five percent of the banks in Connecticut have no problem with it,” said Gerald M. Noonan, president of the Connecticut Bankers Association, a trade group. “We think of it as a real plus.”

The complex is a large one, with a 21 story tower and the big trading floor.  For years the building was the shiny thing on the end of corporate row.  That wouldn’t last.

The problem trading and trading floors is that trading comes and goes like fashions and trading floors are by and large clubhouses for the traders to put their computers. UBS wasn’t making any real investments in Connecticut or Stamford, beyond leasing an office building and had no real ties to anything in the state except for some workers living here.  So once the company was here there wasn’t anything to keep them if there was  a better deal someplace else.

So what does the esteemed governor of our revenue strapped state do?  Offer them yet another deal.  In desperation.

DARIEN — The party was at the Dilenschneiders’, and everyone was going. Nominally, it was a party to honor Henry Kissinger on the occasion of another book he was putting out. So Linda McMahon showed up, pressing flesh for another Senate run, as did Chris Shays, who was returning to the state to run against her. The guests packed the shoreline trophy of a house, eager for a chance to greet the eminence of realpolitik: the great Kissinger. But Dan Malloy wasn’t there for the guest of honor. He was there for a chance to have a few quiet words with his host.

Bob Dilenschneider was his source for information about UBS. Dilenschneider would tell him if the rumors that the bank was pulling out of Stamford were true, and what, if anything, the governor could do to stop them.

Dilenschneider was a guy known to Malloy, one of the innumerable black suits who patrolled the Stamford-New York business nexus Mayor Malloy had eagerly cultivated. Dilenschneider had run Hill & Knowlton, the giant public relations and lobbying firm, and now steered his own company, The Dilenschneider Group, specializing in helping corporations manage their public façades and cope with the occasional disaster. He was a man of substance and size, imbued with jowly gravitas, and he spoke in an authoritative bass that sounded a bit like actor Philip Baker Hall. (Not that he could negotiate every high wire. One Malloy staffer watched, cringing, in mid-July, as Dilenschneider appeared on Fox News in a widely mocked segment that tried to explain away the phone-hacking scandal at News Corp. by positioning the Rupert Murdoch conglomerate as a victim, rather than a perpetrator.)

Dilenschneider was now advising UBS, the giant investment bank that Gov. Lowell Weicker had lured to Stamford, just as Dan Malloy was making his ascent from Board of Finance member to win the mayor’s race. Bumping elbows then was both work and pleasure. It was fun being a big shot with the other big shots. And it was necessary if he wanted the city to continue to stake its claim as a tony outpost of the financial industry in New York City.

But now Dan Malloy was governor, and the ugly rumors had swelled loud enough that the press had begun to ask about them. Was UBS pulling out of its giant Stamford headquarters? Would UBS move back to New York?

Which apparently UBS reneged on.  No real surprise there. When the money involved is billions a year, 20 mill is small change.  And it’s not as if life is improving here in Fairfield County in the last eight years or so. So why should UBS stay?

The truth of the matter is what difference will it make to the state if they go? Like all the other buildings that went up in Stamford, the economic contribution to the city was pretty minimal. As I point out here.

Here’s a short drive around town.

While this is downtown, I’m just going to point out that there are no factories in Stamford anymore, that I know of.  And lots of apartments that are expensive, but basically for sleeping only.  The goal is to make your money in trading or a hedge fund and get out as fast as possible. The same goes for houses built outside the city in the towns surrounding the area, which leads to places that are expensive but rather lacking like those here.

Connecticut’s problem is that instead of creating a climate where starting and growing a business was  easy and simple, the goal became to attract as many corporate HQ’s as possible. Instead of the hard work involved in developing the economy and making cuts in spending and regulation it became all to easy to slide, one regulation or tax down the slippery slope toward oblivion.

The problem is that the people in charge never understood or forgot  that those corporate HQ’s were simply in the state because of convenience. As the Whyte city book shows, mot of the HQ’s moved where they were to give the CEO’s a short commute.  So there was never any true allegiance to Connecticut and chasing those companies was, in the end counter productive.

The problem was that Connecticut got too fat on that corporate money.  It became all to easy to neglect the hundreds of companies actually making stuff as one by one they slipped out of the state for one reason or another.  All too easy to ignore the problems.

Especially when all too many people didn’t want to change anything.  It’s far easier to placate those who don’t want a new store, highway or factory in their neighborhood than to fight them and maybe lose the next election.  So the people who want to stop the state advancing into the 21st century have far more influence than the people who do.

The situation has become unavoidable now.  No amount of tax increases will enable the state of Connecticut to meet it’s fiduciary obligations and maintain any level of service.  without significant economic growth, the state is going into an economic death spiral as the tax base that is left leaves to survive.

If the state of Connecticut is to survive the people in charge are going to have to realize that the policies of the last 30 years were a mistake.  A mistake illustrated by the remains of dead factories that litter every town and city in the state.  The state can no longer afford to cuddle up to fat cats and money bags at the expense of it’s manufacturers and small businesses.  We simply cannot afford it. The state government should set a program that ensures that business startups are easy and small businesses are not buried under piles of meaningless red tape.  The state’s failure to create new businesses is an insult to all the people that created the state’s wealth in the first place.  We’ve run out of surplus and it’s time to plant again. The state need to make the ground fertile again.


IBD has more here:

The same is true of Connecticut. The Yankee State was once one of the most prosperous places on the planet, and until 1991 it had no income tax. Its other key attribute was its proximity to high-tax, anti-business New York. But over the last 25 years, Connecticut has been in a free-fall as it has raised its income tax four times, leading to towering deficits.

The joke now in Connecticut is: Will the last person in the state please turn out the lights? As Connecticut depopulates, there may come a time when one super-rich person is left living in a Greenwich mansion who is highly educated and with three patents to his name, and the Times can say: Look how prosperous and highly educated Connecticut is.

By the way, a 2014 poll found that 49% of Connecticut residents say they want to leave the state — second only to Illinois at 50%. The exodus is on: 156,057 people have left Connecticut since 1992, taking $9.5 billion in income with them. As people in Fort Lauderdale and Naples, Fla., will tell you, it seems like every third person here is from Connecticut.

Red States Really Are The Model Of Economic Success

For more on the dysfunctional economy click Here or on the tag below.

One comment

  1. Joe Wooten · September 5, 2016

    Illinois is also well down that path. Small factories and the businesses that feed them are leaving or closing every day here.


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