Comments on: How the MTA’s global investments backfired

By: Second Ave. Sagas | A New York City Subway Blog » Blog Archive » » Clearing up an economic mea culpa

Thu, 06 Nov 2008 06:22:27 +0000

[...] Monday morning, when I ran a piece on the MTA’s global investments, I leveled some fairly serious charges at MTA CFO Gary Dellaverson and his investment strategy. [...]

By: Second Ave. Sagas | A New York City Subway Blog » Blog Archive » » MTA playing the Hudson Yards waiting game

Tue, 04 Nov 2008 06:38:54 +0000

[...] this confidence is all well and good, but this news — coupled with yesterday’s examination into Dellaverson’s risky investment strategy — makes for a rough week for the MTA’s [...]

By: Angus Grieve-Smith

Angus Grieve-Smith — Tue, 04 Nov 2008 01:51:25 +0000

Back in 2005 I went to a talk given by Peter Kalikow, who was head of the MTA at the time. He encouraged us to vote for the MTA bond issue that was on the ballot then. Afterwards, I asked whether it was wise for the MTA to be taking on so much debt.

Kalikow asked, “Do you own a home? Do you have a mortgage on that home?” If I’d known then what I know now I’d have said, “Yes, but it’s a fixed-rate mortgage!” Aren’t you supposed to lock in rates at the bottom of the market? Isn’t that what we hired him for?

By: Marc Shepherd

Marc Shepherd — Mon, 03 Nov 2008 19:28:45 +0000

It’s important to note that this mistake was widely duplicated, all over the country. While I am not defending it, it was not an isolated error of judgment at MTA HQ. Lots of very smart people were taken in.

By: Julia

Julia — Mon, 03 Nov 2008 17:21:31 +0000

I think you’re saying pretty much the same thing as Ben. Just substitute “irresponsible” for “greedy”.

I don’t think the MTA should be experimenting with risky newfangled financial products, ever. That’s true whether the market goes up or down — the issue is not whether, with 20/20 hindsight, you picked a winner, but whether the strategy at the outset was a wise one.

The thing is, as we now know, everyone was wildly underestimating risk over the last decade. All the major banks and financial institutions. Alan Greenspan, for crying out loud. I’d bet that even if the same people stay in charge at the MTA, they’ll be much smarter in the future.

By: Chris

Chris — Mon, 03 Nov 2008 16:53:37 +0000

They didn’t get greedy. They tried to do more with less, by taking a riskier loan. It is the same thing that many people did, and it is not inherently greedy. It is only a bad decision if you are not able to handle the risk of the payments going up (and we are finding out that many americans are not able to handle that).

Perhaps the MTA should have been more conservative with the public’s funds, there is a reasonable discussion there. However, if there hadn’t been any trouble with the banks, perhaps we would be having a discussion about how the MTA was lazy instead of seeking cheaper financing.

Any MTA CFO has to be able to look into the future for the life of the loan. If they get the wrong answer they get criticized for wasting public funds.

-Chris