Thursday, February 07, 2008
Howard P Milstein At The NY Times
Howard P. Milstein is the chairman and chief executive of New York Private Bank and Trust, which owns a significant share of stock in The New York Times Company.I'm sure this guy has no axe to grind at all, right? I'm sure he's not using the editorial pages of the NY Times for any purpose that's not completely public-spirited. I'm just completely certain that the CEO of a bank that owns a lot of the NY Times wouldn't be advocating for anything that would benefit himself and his stock holdings in writing:
The losses that have been incurred as a result of the excesses in subprime mortgage lending will take years to work their way through the worldwide financial system, as dozens of banks act to replenish their lost capital by issuing more common stock in the public markets and trading other equity securities to sovereign wealth funds. Until the banks rebuild their capital, they will not have the wherewithal to lend money and support economic growth. If banks of all sizes could regain their capital immediately and easily, it would be a tremendous benefit to the American economy.Heck, yeah! That's banking win-win proposition! Taxpayer gets the losses, bank gets the profits!
The federal government could make this happen by entering into an arrangement with American banks that hold subprime mortgages, in which homeowners typically pay a low interest rate for two or three years then face much higher payments. Here’s how it would work: The government would guarantee the principal of the mortgages for 15 years. And in exchange the banks would agree to leave their “teaser” interest rates on those loans in effect for the entire 15 years.
Under this arrangement, American banks would have an incentive to buy back the subprime debt now being held by foreign banks and other financial institutions. American banks could buy the securities at a discount to face value (reflecting the continued low teaser rates) and then, thanks to the government guarantee, hold them as capital assessed at their full value.
The only problem I see with this proposal is that it does not extend the logic far enough. Since bank lending is fundamental to economic growth (no matter how bad the lending is, in the Milstein School of Economics), clearly all we need to do to ensure a century of unbelievable prosperity and a Peugot in every pot is to pass a law ensuring that no American bank ever takes a loss on any loan. If the loan defaults and the full principal balance can't be recovered, the American taxpayer will just refund the difference to the bank. I am sure many, many loans will be made with the most extreme caution under such a system.
What the heck. Why not. It's not as if a failure by banks and other financials to be cautious about lending standards caused this problem in the first place, right? We all know that the Martians landed, causing a panic, which naturally prevented everyone from getting out there and shopping like they should. I'm sure if we tell the banks that the federal government will pay back an uncollected credit card debts we'll be able to get those American citizens out there shopping like good old patriots again.
Of course, the auto manufacturers employ a lot of Americans too, and as we all know, what's good for them is good for us. We should obviously immediately pass a law that prevents any of them from taking losses on loans as well.
Oh Howard, our savior! You are truly deserving of Cornell's highest awards:
Howard P. Milstein '73, co-chairman, president and CEO of Emigrant Savings Bank and its holding company, New York Private Bank and Trust, and managing partner of Milstein Properties, has been named the 2008 Cornell Entrepreneur of the Year.It's a good thing that Howard has nothing to lose if, for any reason, an ungrateful nation does not embrace his brilliant proposal and, for some unrelated reason, property values should decline in NYC and Washington DC.
The award is given annually to a Cornell graduate who best exemplifies entrepreneurial achievement, community service and high ethical standards.
Milstein Properties owns both residential and commercial properties in New York City as well as New Jersey, Connecticut, Niagara Falls, Chicago, Washington, D.C., and internationally. Over the years, Milstein created the first (and, still, the only) national television advertising campaign for a stand-alone hotel, the Milford Plaza. He founded a cable television company, Liberty Cable, which successfully competed with Time Warner, and he was the first to use the commercial paper market to finance real estate.
Milstein also purchased and re-established Douglas Elliman as the largest apartment broker and manager in New York City. By the time the company was sold, it commanded nearly 40 percent of the market. Milstein diversified the family real estate and international business holdings (United Brands) with the 1986 acquisition of Emigrant Savings Bank.
In 2004 Milstein took full-time operating responsibility at the bank. Within one year, he launched an Internet bank, EmigrantDirect, which, in 2005, won two awards from Google. After three years, EmigrantDirect acquired nearly $9 billion in deposits and rapidly outpaced long-established competitors in average account size. He also created a wealth management operation under the New York Private Bank and Trust brand and introduced co-investing with all fees subordinated to performance, for ultra high net worth clients. Under Milstein's leadership, Emigrant (and its holding company, New York Private Bank and Trust) has evolved into the largest privately owned bank in the country, with assets of more than $15 billion.
You may ask me, MoM, how could it be that even the dimwitted clods that most of us are could remain blind to Howard's brilliance?
Well, I hate to tell you this, but certain entities might maintain that cutting the Fed Fund rate very low gives banks the ability to maintain the teaser rates. There might be allegations that auctioning money to banks, providing pools of lending through the GSEs, and lending by the FHLB system are all measures designed to prevent the flow of capital to healthy businesses from being cut off, while allowing banks to take losses as the result of inadequate due diligence. These benighted creatures might maintain that guaranteeing all banks against loan losses would produce a situation in which banks had no incentive whatsoever to verify that their loans are extended to entities who might reasonably be expected to repay them. Such feeble fighters against a new era of banking prosperity might even go so far as to maintain that if no principal losses will ever accrue to an American bank, the banks that are the most reckless and unethical will become the most prosperous.
Such are the gross accusations ever leveled against visionaries of American prosperity.
I'm just worried about one thing. If non-American banks get to take the losses, while American banks get the profits, won't this engender a wee bit of wrath abroad? Won't it, you know, cause a bit of heartburn? Wouldn't the banking executives of other countries ask their governments for reciprocal treatment? I'm just not seeing how this would create a new era of global friendship.
How much stooopider can we get? Surely there must be some upward limit on stupidity?
And how much time can the working stiffs afford to spend on vigilance? It's almost like we should be forming up committees of ordinary people and paying them a salary to lobby Congress and talk to the "trained journalists". I agree with you that we need to be vigilant, but this is like fighting an incoming ocean tide of greed combined with money.
We can't make these loans good and we can't stop the economic effects of making this amount of bad loans.
We sure can make it worse!
What were you thinking!
But if the federal government does guarantee the principal on these loans to the banks, the American taxpayer will end paying for them. It's true that the foreign banks would take big losses, but those ah, profits would be shunted to the American banks, and all the losses would be shunted to the taxpayers.
The mind that can blithely and shamelessly propose such a thing is a deeply twisted one.
In any event..maybe I'm missing something, but I don't see the bank capital shortage as an insurmountable problem:
1)Banks will issue new equity, dilute existing shareholders, and rebuild their capital.
2)New banks can be founded, without the legacy of bad loans
3)Non-bank "business development companies" (like AINV, ACAS, and ALD) can increase their lending to and equity financing of businesses
4)Large cash-rich companies with financial arms (like GE) can do the same
After the S & L mess, how did a real estate property developer end up owning a financial institution? I thought we learned our lessons after Keating et al.
I am deeply offended by this editorial. This guy (and the oh-so-liberal NY Times) is advocating that the homeowners lose their homes and the government pay back their banks so that they can continue to screw another generation of homebuyers. Yeah, sure, this is going to lead to prosperity!
One of my brothers told me that now he can understand why a generation of die-hard Dems emerged in the wake of the Great Depression. If this is what they were seeing, one can hardly blame them. The problem is that we do not have a Dem party that's the same as that one!
Louis Kestenbaum”s attorney says the allegations are false and motivated by money. Kestenbaum is also the CEO of Fortis properties and the ODA a goverment funded organisation in the williamsburg section of Brooklyn NY
The girl, now 17, claims Louis Kestenbaum invited her to his Florida mansion in 2005 to perform a massage for $300. The lawsuit, filed in federal court, claims he demanded she remove her clothes, then sexually assaulted her.
The girl, her father and stepmother are seeking more than $50 million.
I just want to add that this louis kestenbaum is the father of JOEL KESTENBAUM
Mr. Milstein is not proposing that people lose their homes; he's proposing a way for them to keep them by having the government (who approved the sub-prime models) guarantee the teaser interest rates.
If consumers cannot afford the ratcheted-up interest rates (the reason the foreclosures are occurring), the banks will continue to foreclose and the crisis will escalate.
Since Emigrant Bank did not offer sub-prime loans, Mr. Milstein has no financial incentive to have his plan implemented. In fact, he very publicly warned major Bank CEOs long beforehand that the sub-prime model would get them into trouble. They should have listened.
Regarding the character assassination that business leaders seem to attract, you should research the massive philanthropic contributions that Mr. Milstein has made to life-saving and educational causes over the decades.
As for the "psychopathic yes men" he surrounds himself with, if that were the case, he wouldn't be one of the wealthiest people on Earth. He earned his money by creating a talented team that execute strategically and with precision.
These comments remind me of the same litany of verbal abuse suffered by other innovators like Bill Gates, Larry Ellison, Steve Jobs, and Warren Buffet.
Try building a multi-billion dollar enterprise yourself. It's not easy and it's not luck. Mr. Milstein and his ilk do more for our country in one day than most of us do in a lifetime.
This is the guy that put $1000 into the checking accounts of every Katrina victim banking with Emigrant. If he did that for publicity, there are less expensive ways to achieve similar results.
I mean our President has said they should not be earning salaries above $500,000. and Milstein was after all a big and early supporter of Obama.
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