By Nathan Tankus, a student and research assistant at the University of Ottawa. You can follow him on Twitter at @NathanTankus
Since the Reagan/Thatcher era, it has been common to view politics vs. infrastructure as simply a battle between right wing forces attempting to privatize infrastructure and others trying to defend it. (I covered the latest attack by President Obama on the TVA.) However, this is only the recent history of United States infrastructure policy. Much of America’s public works infrastructure was privately built (with public subsidy of course) by businessmen attracted by the possibility of huge crowds of customers. Transit in New York City was no different. By the 1920’s the two privately owned subway lines were the Interborough Rapid Transit Company (J.P Morgan’s subway) and the Brooklyn–Manhattan Transit Corporation (Chase National Bank’s subway). They were known respectively as the IRT and the BMT. Additionally, Rockefeller owned the elevated railway lines (we’ll get back to this in a future post) but leased them to the IRT. If you have had much experience with New York City subways, you can easily tell that there is a significant difference between the lines built and managed by different companies.
New York City transit was very profitable in the late 19th century to early 20th century. It was the fastest way to travel around the city and served a large and growing industrial sector. Each transit company was given exclusive city franchises and received substantial financial subsidies. The most significant of these subsidies was that the City agreed to pay the construction costs of the new lines. The first subway was built under a contract between the IRT that was signed on February 21, 1900. This became known as Contract 1. Contract 2 was signed with the IRT on September 11, 1901.
After the success of the first two contracts, J.P. Morgan sought to expand his transit system and Chase National Bank became interested in expanding theirs. This would allow both to capture more ownership rents from running the transit system (as well as drive up the value of more of their property by making it more accessible). The next round of negotiations ended in the Dual Contracts of 1913 (signed March 19, 1913), which was the beginning of the end for privately owned subway and railways in New York City, although their owners didn’t yet know it.
Fearing what progressive mayors around the United States were accomplishing (for example, Tim Johnson in Cleveland), the BMT and IRT owners were adamant about fixing a 5 cent subway fare. This quickly became a progressive guarantee of a low fare once labor costs and inflation rose because of the World War I. Additionally, the deals made before the war were based on financial projections from a pre-automobile era. The number of people using their transit systems fell tremendously as cars started to be mass produced and marketed. On the elevated railways, for example, carried 500 million fewer passengers than projected between 1917 and 1922 (Horan 1985).
More profit pressure ensued. Tammany Hall and the Hearst newspapers supported Brooklyn politician John Francis Hylan in his mayoral run of 1917. He proposed and built the Independent Subway System (referred to as the IND), the first municipally-owned subway system. He inveighed against the robber barons, and he won re-election by fighting proposals to raise the subway fare. However, this wasn’t exactly out of the goodness of his heart. Tammany Hall and these oligarchs were in competition over looting the budget and Hylan’s policies should be seen in that light. Additionally, he was silent about the garment industry and the battles it was fighting with unions at the time – suggesting a possible relationship with this industry. His subway policy would make sense in this light. More subways would lower the commute time of workers (by bringing closer subways and less congestion) and the IND would help to prevent a rise in subway fares, which would keep down the cost of living and thus necessary pay of their workers.
All of these factors led to dramatic financial problems for these companies. The BMT went into receivership in 1918, a form of financial reorganization where a person is appointed (often by a court) to run an organization. Usually the organization has failed in some major way to keep up with their obligations. Meanwhile, the IRT had a default in 1921 which required a major reorganization to avoid banktruptcy. In response, both operators did what any good capitalist would do: try to charge higher prices and dump their losses onto government. However, they were unsuccessful during the 1920s. Absorbing losses on the scale the robber barons sought would impinge on the funds available to Tammany Hall’s patronage system. Meanwhile, these companies were massively unpopular and there was enormous political pressure to resist their demands. By the end of the 1920’s it seemed as if they were in the wilderness. Like most things, the Great Depression changed all that.
The failure of Creditanstalt (Lehman Brothers an Austrian bank) in 1931 produced an international financial panic that harmed, among many other things, the municipal bond market. Anticipating Rahm Emanuel’s dictum to never let a serious crisis go to waste, a veritable list of who’s who among New York bankers organized to hold the city for ransom. “Spokesmen for a syndicate of J.P Morgan & Co, National City Bank, Chase National Bank, Kuhn, Loeb, Guaranty Trust, First National Bank, Bankers Trust, and Bank of Manhattan Trust refused to bid on the issue,” that is, a New York City bond offering (Horan 1985, pg 212). Apparently this was a time when bankers had to point a gun to other people to get what they want, rather then themselves. The consortium then went into negotiation with the city over their finances. As you can imagine their interest was as much in getting higher subway fares and municipalization at high prices as it was in making sure they could get paid back. This was not a secret. In a New York Times article, “Bankers to demand rise in subway fare,” this statement appears:
…speedy unification, with provision for a self-sustaining fare, it is understood, is so attractive to these groups as to make them willing, despite the general weakness of the bond market, to undertake the flotation of such city corporate stock and board of transit control bonds as may figure in the unification deal… [these direct negotiations] are taken in some quarters as an indication that the question is closely allied with the city’s general financial situation.
The eventual agreement was a bonanza for the bankers. The city agreed to unify the transit system, increase subway fares, and segregate all tax revenues from the general budget for the purpose of paying off bonds. All these concessions were in exchange for the ability to borrow at higher interest rates than ever before. In order to finance even minimal relief spending, the city was forced to impose a regressive sales tax. As former Roosevelt man A. A. Berle said: “The bankers have virtually stated as a condition of any relief credits they want a sales tax” (letter to president Roosevelt, October 23 1934, cited in Horan 1985). The city finally purchased these bankrupt companies for an enormous $315 million in city bonds. Yet, by the 1970’s the city’s financial problems were blamed on “the fucking blacks and Puerto Ricans,” as a spokesman for the Municipal Assistance Corporation told Robert Fitch.
Thus, the city paid out massive subsidies to major financial interests to build city transit that was massively profitable for a time. Then, when these going concerns turned sour, J.P Morgan, the Rockefellers and the top bankers at Chase National Bank did everything they could to coerce the city into buying the transportation system and the bankrupt companies along with them. The prices they demanded were outrageous and helped bleed the City’s finances dry. In modern times, the descendants of these same interests push (and sometimes succeed) in getting the same infrastructure privatized in the name of “efficiency”. Don’t be surprised if in the future privatized property is nationalized again for many multiples of what was originally paid by governments and what their profit margins would recommend. It seems oddly appropriate given this history that the financial descendents of J.P Morgan and Chase National Bank have merged and are now considered “too big to fail”.
Most of this post and follow up posts are based on two articles in the 1985 issue of Research in Political Economy. I would like to thank current editor of the journal Paul Zarembka for access to them.
Sources:
Fitch, Robert. “The Family Subway.” Research in Political Economy 8 (1985): 163-200.
Horan, Cynthia. “Agreeing with the bankers: New York City’s depression financial crisis.” Research in political economy 8 (1985): 201-232.
Bankers to demand rise in subway fare. (1932, Mar 28). New York Times (1923-Current File). Retrieved from http://search.proquest.com/docview/99689614?accountid=14701
34 comments
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Excellent!
Rare to get even a smidgen of urban history these days, let alone one that reaches to the late 1800’s and is still relevant today.
Many thanks.
This is the kind of history they should be teaching at school.
“In fourteen hundred ninety-two,
Columbus sailed the ocean blue,
In nineteen hundred thirty-two,
The banksters bled this city blue
Gone they were, for a time, it’s true,
Now twenty hundred ten and two,
They’re back again to bleed you too”
That was great, thank you. Your comment alone (let alone old.frt’s) made writing this piece worth it.
I’d also like to ‘line up’ to thank you for your work. You are as fine an antidote as Yves Smith and Lambert Strether.
This was great. This is the kind of thing Mrs. Miller, my high school Civics teacher, used to tell us about, except she mostly was talking about Detroit and Dearborn and William Murray of Old Henry’s “Service Department.” I agree this kind of thing needs to be taught in the schools, but I am well aware that if any student had reported Mrs. Miller to her parents she would have been fired and blackballed. Our school library did not have a single book that explained what Communism was, nor any history of the Soviet Union, nor who Lenin or Trotsky were, but we had two copies of Mein Kampf.
Dreiser’s The Financier covers this period well in novel form. I remember thinking “there never was a simpler time.”
“After the success of the first two contracts, J.P. Morgan sought to expand his transit system and Chase National Bank became interested in expanding theirs. This would allow both to capture more ownership rents from running the transit system (as well as drive up the value of more of their property by making it more accessible).”
What was valuable to the Barons was land – they fought heavily against taxing land value because they knew the building of these lines would vastly increase their holdings – but it raised the cost of living for everyone else – the rise in land value was not being taxed.
This is the crux of a tax system that favored real estate. The important thing is that the real estate bubble would have developed in any event, simply because of the exponential financial dynamics at work and the increasing tax favoritism for real estate – taxing labor and industry rather than land rent.
I encourage the author to go to google books and download Tax Facts – it was put together in the 1920’s and has many stories regarding how the Barons play the common folk – it even has info on this particular subject
Tankus acknowledges profit pressure on the subways during WW I, but doesn’t fully explore the reason. From the time that records began in 1913, the CPI more than doubled by mid-1920, thanks to wartime inflation. The price level fell back a little during the 1920s, but remained 70% higher than it had been when the nickel fare was established. Details:
ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt
Tankus summarizes the early 1930s takeover with the pejorative-sounding comment, ‘both operators did what any good capitalist would do: try to charge higher prices and dump their losses onto government.’ Let’s see: the transit operators suffered grievous injury at the hands of government, whose inflation leached away the purchasing power of their revenues. Trying to defend themselves from this injury somehow morphs into ‘dumping’ losses on the party that caused it?
Ultimately, the crux of Tankus’s case rests on one sentence: ‘The city finally purchased these bankrupt companies for an enormous $315 million in city bonds.’ The city had two other choices: either to provide operating subsidies for the money-losing subways, or to allow a fare increase. But their populist political agenda was to keep the nickel fare, and $315 million was the cost of doing do.
How did that work out? Let me count the ways. First, the nickel fare lasted until 1948, when another disastrous burst of postwar inflation produced losses so large that even the city couldn’t stomach them.
Secondly, the political agenda of holding down fares produced a chronic starvation of capital investment, to the point that by the 1970s the subways were being derided as ‘electric sewers.’ (I worked on the rebuilding program to clean up the mess in the early 1980s.)
Finally, today’s $2.50 subway fare illustrates a rather different little morality tale than Tankus intended. The so-called robber barons could truthfully claim that in a quarter century of operating the subways, they never raised the fare. By contrast, New York’s populist government has now raised transit fares by an eye-popping multiple of fifty (50) times.
Who’s the real robber baron here, Mister Tankus?
Comments like these are dangerous because although they are full of misleading statements, your writing has a relationship to truth if you squint hard enough.
As far as I’m aware, New York City didn’t cause the inflation of World War One. Second of all, there are plenty of businesses that become unprofitable because of events (and why you are obsessed with inflation rather then the IND or the automobile is beyond me) that FAIL because of events. As I describe here, unification and fare increases didn’t just happen, the city was forced to agree to it by these bankers directly. If you think inflation justifies shotgun weddings by bankers, well I don’t think there is any point in us arguing.
“But their populist political agenda was to keep the nickel fare, and $315 million was the cost of doing do.”
No this is a straight up lie. First, your knowledge of the history is obviously zilch. THe agreement was under Mayor Walker, not supposedly progressive Laguardia. Second, how many different ways can I say they were forced by a syndicate of bankers to do their bidding on the subways in exchange for being able to borrow again. Do you know anything about businesses? Do you understand that two basically bankrupt businesses should cost NOTHING or less then nothing for the City to take over? If this were simply a normal business deal, those bankers would and should get nothing.
“Secondly, the political agenda of holding down fares produced a chronic starvation of capital investment, to the point that by the 1970s the subways were being derided as ‘electric sewers.’ (I worked on the rebuilding program to clean up the mess in the early 1980s.)”
are you actually naive enough to think the bankers stopped caring about the subways because they no longer owned them? As I am going to describe in a later piece, they didn’t just sell them their lines, they pushed the city to knock down all the elevated railways in manhattan and the Rockefellers got them to build a 6th avenue subway to make Rockefeller center profitable. The boom in subway construction after world war two was driven by major New York FIRE interests and it’s their abuse of the budget that harmed the subways and the city.
“Finally, today’s $2.50 subway fare illustrates a rather different little morality tale than Tankus intended. The so-called robber barons could truthfully claim that in a quarter century of operating the subways, they never raised the fare. By contrast, New York’s populist government has now raised transit fares by an eye-popping multiple of fifty (50) times.”
If you think a billionaire right wing tycoon is a “populist”, we clearly live in different realities. Again your comment represents the very misleading assumption that banker’s abuse of the city’s finances stopped after this point. it didn’t. the most recent problems have been caused by forcing the state and city to use a highly unstable real estate transaction tax to finance the subways. Since the financial crisis these revenues died which has necessitated repeated service cuts and continuous fare increases. That’s hardly because of cost-overruns.
Beat me to it.
Bravo!
i 2nd Mckillop, “I’d also like to ‘line up’ to thank you for your work. You are as fine an antidote as Yves Smith and Lambert Strether.”
(you also demonstrate a firm grip on the usual JimHaygood disinformation…excellent!)
Excellent riposte – and there is probably a deeper historic financial issue of how we so rarely end up with social capital needing only maintenance charges free of economic rents.
”
But their populist political agenda was to keep the nickel fare, and $315 million was the cost of doing do.”
Actually it was the owners who insisted on a fixed 5 cent fare, which at the time seemed to them to guarantee a profit.
From the article;
“Fearing what progressive mayors around the United States were accomplishing (for example, Tim Johnson in Cleveland), the BRT and IRT owners were adamant about fixing a 5 cent subway fare.”
The ‘progressive agenda’ you mention did not exist, it only became so because of the unforseen effects of war, automobiles, the depression and associated inflation.
The banks got what they wanted, afixed fare, and eventually choked on it, requiring a bailout, the price, and terms of which they set themselves.
Sound familiar?
But Galt!!!
Interesting, but poorly written and decidedly unbalanced. Jim Haygood has the better take on the matter.
The opportunities for business / government corruption are endless…
During the 2008 implosion, Florida Gov. Crist purchased swampland from developers and touted it as “environmentalism”. I have my doubts. How do we know the developers didn’t unload worthless inventory still at wildly inflated prices? Further, I have to wonder whether the state doesn’t sell that or other acreage back to developers at lower prices in the future.
NYC did sale – leasebacks of its subway cars, providing a tax shelter for banks who then depreciated their newly bought assets against profits, leaving some banks, such as Wachovia, with no corporate tax bill. If you are doing research into urban fiance, this is a mother load.
————
FROM THE NEW YORK DAILY NEWS MARCH 2004:
“Subway fare hikes could be coming down the track for the city as a result of a government plan to zap federal tax breaks for some big companies. A Bush administration proposal to block several corporate tax shelters could put an end to a gravy train that’s let the MTA reap millions of dollars by quietly selling subway cars to private corporations, including Altria, the parent of Philip Morris, then leasing them back. That means the MTA will have to look elsewhere for much-needed cash to keep the subways rolling. “They’ll have to raise fares or come up with money some place else,” said a source close to the MTA. For years, cities across the country, including New York, have been participating in these shelters that involved selling off subway cars, buses and sewer systems to big companies that have been getting tax breaks when they lease the facilities back to the municipalities. New York’s deals were struck with mega corporations like Altria and Wachovia, who have bought 570 subway cars, according to Bloomberg News. Textron and Wachovia bought another 155 New York subway cars. Also, Bank of America bought 60 subway cars worth $125 million. MTA officials declined to comment yesterday. One MTA exec told the Daily News that a proposal under consideration in Congress to remove the tax breaks “won’t have a direct or immediate impact on fares. But you have to assess how you make up [for the shortfall].
” In addition to $1.
2 billion the MTA reaped from the sale of 570 subway cars, several years ago it also unloaded its MetroCard system and reaped $50 million, a source said. Michael Geffrard, president of investment banking firm Liati Group, whose clients include the MTA, noted how important such deals are for keeping subway fares and taxes down. “This is a form of financing that allows municipal entities to raise much-needed capital for infrastructure improvements,” Geffrard said. Senate Finance Committee chairman Charles Grassley, who’s leading the charge to dump the lease-back deals says they’re an abuse of the tax law that cost the federal government money. And private corporations are already getting the message. Altria said in a statement that “due to a change in strategic direction in 2003, the company is no longer making lease investments and is instead
Read more: http://www.nydailynews.com/archives/money/red-light-mta-gravy-train-ending-subway-car-tax-shelters-lift-fares-article-1.601493#ixzz2TT6LyxB8
http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&sqi=2&ved=0CFkQFjAE&url=http%3A%2F%2Fwww.osc.state.ny.us%2Faudits%2Fallaudits%2F093000%2F97s57.pdf&ei=MfWUUcuvIPPi4AOBroDADQ&usg=AFQjCNEn4JzcJwhoqgGcQsqWm4-p4t9MrQ&sig2=JeG4qDhw47grA1sL0W4m7g&bvm=bv.46471029,d.dmg
The history of private finance in UK transport is equally dismal – from the Channel Tunnel,the bridge to Skye and even Casey Jones’ burgers (decent and edible when British Rail, rubberised under privatisation).
I all the time used to study article in
news papers but now as I am a user of web so from now
I am using net for articles or reviews, thanks to web.
+1000
(… just kidding.)
Why not take a second example in New York City: the former Hudson & Manhattan tubes, built at the same time as the NYC subways.
In contrast to the NYC subways, the H&M managed to receive just enough fare hikes under its regulator, the ICC, to keep limping along into the 1960s with its original fleet of riveted-steel ‘black cars.’
During the 1940s and 1950s, the derelict H&M continued to trade as a penny stock, hovering at around a dollar a share for years. Yep, lots of profit here for robber barons in that stagnant share price! [That’s sarcasm, I feel obliged to note for our cloistered academic readers who think that ‘basically bankrupt businesses should cost NOTHING or less then nothing.’]
The H&M’s long fade changed with its acquisition by the Port Authority in 1962. And why did that happen? Why, to feed commuters into the planned World Trade Center towers — the same transit/property value link which appealed to the Morgans and Rockefellers. But government exploited it on a far more grandiose and uneconomic scale: downtown Manhattan was plagued with a high vacancy rate for years after the WTC towers opened, thanks to their pharaonic capacity additions.
Although it started thirty years later than NYC, the Port Authority has been no slouch at aggressively exploiting its monopoly pricing power, having cranked the PATH fare by a multiple of 11.25 times since it took over. Doubtless there will be yet another fare hike to ‘celebrate’ the new World Trade Center’s opening.
Again I ask you, Mister Tankus: Who’s the real robber baron here?
are you expecting me to explain to you the true origins of every public transit project that annoys you? You keep on talking about projects that are clearly FIRE led, yet by some unexplained mechanism are the “government’s fault” rather then the result of very clear dynamics led by the private sector.
On the only point that needs debunking: raising prices doesn’t make you a monopolist or a robber baron. These guys are robber barons because they got massive public subsidies to build wildly profitable lines that when events turned against them (and their own demands ended up hurting them), found a way to turn bankruptcy into incredibly more profit by holding the city hostage.if in your world raising prices so that they are still BELOW unit cost is monopoly pricing power, your world should include a straitjacket. One of the major points of this post is that the competitive position of public transit was seriously deteriorated by the proliferation of Cars and Trucks.
Oh by the way, you clearly know nothing about businesses. most companies that enter bankruptcy are insolvent- ie their liabilities are more then their assets. In other words their net worth is negative. paying nothing to an entity that’s net worth is negative is actually generous since you are essentially agreeing to pay debts not covered by assets. Simply asserting that bankrupt companies should get high sale prices in a snide tone doesn’t change that. Insolvent banks are frequently taken over for sale price.
shorter jim haygood:
Gobbmint always bad, private parties always good.
Like most (all?) libertarians he’s in complete denial that private organizations can be just as evil and powerful as public ones, and without any accountability to boot.
jim, the world changed at the time the world trade center opened, you do remember the increase in crime that went with the abandonment of the waterfront piers when all the sea commerce went to LA after the end of the vietnam war ?? The elimination of fixed commissions helped kill off the market for office space downtown and the world trade center was an attempt to jump start new york city as more than a dead city…Chicago had sears tower and nyc had stupidity envy, as both the sears tower and wtc were money losers, as is just about any building built over 65 stories tall…the ego keeps the buildings being built taller…its a structural and logistical nightmare past a certain height.
Great article Nathan…!!!
The owners could sell the right of way and the rolling stock and cease operations or they could keep the right of way and rolling stock and cease operations. The city rightly perceived that the former was a better option than the latter. Since no one else would, the city acquired the right of way and the rolling stock and continued operations. The right of way and the rolling stock had value greater than zero. Tankus makes no attempt to acknowledge this or evaluate what the value of the right of way and the rolling stock might be worth. He only asserts without source that 315 million was too much.
do you know what a balance sheet is? Your comment reduces to “well they had an asset that was worth something”. That’s true. However, just because a company has an asset doesn’t mean they don’t have liabilities greater then their assets. The evidence of their financial value is in… well there financial value! these companies were in constant financial troubles and the IRT was in receivership. If these companies weren’t in financial trouble they wouldn’t have been trying to offload them onto the city.
All this ignores the irony that you essentially think the city should pay 315 million dollars in city bonds to buy back the city franchises they gave these companies in the first place. Franchises that were going to expire soon anyway.
I do list sources for this piece. If you’d like to read them send me an email.
I call this sort of activity;
Talking to bowling balls.
I agree. however their comments bring up issues that people arguing with more good faith would have questions about. having a response on the record is useful.
I have a question somewhat off subject and possibly stupid as well but I’ll ask anyway. What about AMTRAK? I don’t have any facts but I recall a retired R.R. manager I met hinting that the rates that Amtrak pays for using the rails are higher than freight pays for using the same rails. Regardless, the Amtrak fares seem a little high. My daughter was comparing a trip from Fort Worth, Texas back to New Jersey and the AMTRAK ticket cost more than a bus ticket. I thought it was much cheaper to move freight by rail than by truck. What makes moving people so different? Are there added costs, say due to supplements to carry people to less frequented destinations or is there more going on with Amtrak than meets the eye? [The other thing about my daughter’s trip home was her claim that the only Amtrak trains from Texas to New Jersey came by way of the railhead in Chicago.]
If I may, I’d like to join the other commenters in extoling your submission and would appreciate learning more about problems and issues with public transit if that’s an area you specialize in (and even if it isn’t — you read like a specialist on the topic).
Jeremy, this is an excellent question. It isn’t stupid at all. First I’d say I’m not a specialist in this topic (despite your kind words). I knew some of the basics beforehand but it’s only in the last month or so that I got really deep into urban history, economics and transportation political economy. That said, I think I can offer some preliminary comments
My first recommendation is always to read the budget for the organization you want to understand. Here is Amtrak’s 2012 budget: https://docs.google.com/viewer?url=http%3A%2F%2Fwww.amtrak.com%2Fccurl%2F963%2F948%2FAmtrakFY12ComprehensiveBusinessPlan-FINAL-wAppx.pdf
no where near everything is in these documents: but a lot of useful information is. For example this quote appears in the beginning:
“Despite recent growth, the United States still has one of the lowest intercity rail usages in the developed world.”
This goes a long way to explaining the issues involved. In general rail and a lot of other ways of transporting people and goods have very low marginal costs and very high fixed costs. that means the start up costs are high but things get cheaper as they pack more people/ goods in. Given all these alternative transportation mechanisms, the occupancy rates are quite low which make the average unit costs quite high. If there weren’t Airplanes or buses, they would have much lower unit costs (although their markup might be much higher/ less subsidies). Also remember that Amtrak was started in 1970 and it doesn’t run its lines or capital projects with purely profit in mind. If it did, many cities would certainly have no access because their occupancy rates are so low.
IN THE BACKSIDE
I think it appropriate to repost here my favorite quote as regards the economic past and, unless we change habits, the future as well.
It is by George Santayana and I paraphrase, “Those who refuse to understand past mistakes are condemned to repeat them.”
Our recent history (of war and economics and boom ‘n bust) is a testimony of our refusal to understand history. For instance:
*The Great Recession was named as such since it parroted very much the Great Depression 80 years earlier.
*Our war in Afghanistan is a exact repeat of the British war there more than a hundred years ago.
*The boom ‘n bust cycle has become pronounced to the extreme by frauds that are offshoots of the original Ponzi Scheme of the 1920s.
And why does this happen?
Because in our mad rush into the future, our fixation upon all that is new and glitzy, our understanding of time becomes forcibly warped. Particularly on Wall Street where what happened 5 minutes ago is History and yesterday is Ancient History. There is no longer any time left for pause and reflection.
Which is why, not taken in its proper perspective, “history” snaps back to bite us in the backside …
The push to privatize this mass transport systems is because the oligarchs now view these systems as potentially profitable.
In a [1932] New York Times article, “Bankers to demand rise in subway fare:
“The eventual agreement was a bonanza for the bankers. The city agreed to unify the transit system, increase subway fares, and segregate all tax revenues from the general budget for the purpose of paying off bonds. All these concessions were in exchange for the ability to borrow at higher interest rates than ever before.”
Your basic timeline doesn’t make sense to me. The bankers bonanza didn’t happen in the early 1930’s (if at all).
1. (unify the transit system) The city didn’t unify the transit system until 1940. Whatever the bankers did to New York in days following the 1931 credit crisis didn’t include dumping the private transit systems for years.
2. (increase subway fares) Subway fares didn’t increase from 5 cents until a decade after unification.
If the Bankers were so powerful, why did they lose money for over 20 years (post WWI until the 1940 unification)?
As far as the $315 million windfall — there is much more detail than a simple transfer from the city taxpayers to the ‘Bankers’.
How much of the $315 went to common shareholders vs bondholders?
How much of the common stock was still owned by Bankers?
It’s not that I don’t believe that you can’t make a case for Bankers behaving badly. Rather, you haven’t in this short blog post.
My personal take on the history of the NY transit systems is that it shows Government, Business, and Labor at its worst for most of the period.
As far as business/bankers — the ‘public/private’ dealings strike me as the worst of all worlds and the real basis for the failure to develop the system that ‘could’ have been built. (WTF is it with the 2nd Avenue Line? — it has been ‘in progress for over a Century.)
The greatest city in the world deserved better from everyone.