THE BLOG
of John Gelles
February 22, 2008
Howard P. Milstein — is a famous NY City real estate developer of whom I had not heard. His Op-Ed plan below is the kind of clear thinking I admire greatly. In trying to find out who HPM is, I chanced accross the following boxed text via Google.
The site I found this boxed text was anti-the Milstein-proposed, Gelles-endorsed, plan. The site thought Milstein, as a banker, might want the global economy protected because that is where his money is. This might cloud his vision. It certainly clouds mine--my money is not here so much as my soul. But if I ever have some money I believe I will keep it here.
In other words, the plan below the boxed text stands on it own as common sense and it is what I want for my nation and my planet. I hope the candidates for office here and abroad will read it and follow it to a T.
-- Signed -- John Gelles
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.
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.
Copyrighted work reprinted here is for educational non profit purposes— and at the teachable moment. It was offered free to me on the internet (as a member of a wide audience) and is copied here free to others adding to its value)— it is fair use of the work
THE NEW YORK TIMES
February 6, 2008 Op-Ed Contributor
Give the Banks Some Credit
By HOWARD P. MILSTEIN
THE $145 billion economic stimulus package that President Bush is encouraging Congress to pass, with its tax refunds for individuals and tax cuts for business investments, may help relieve some of the symptoms of the country’s current financial trouble, but it does not address the most important economic problem we face. The health of the American — and indeed the global — economy depends on having a financial system that is able to extend credit to businesses and consumers.
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.
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.
This would instantly give the lending banks new capital. As these mortgages would be guaranteed by the Treasury, they would suddenly be assessed, on bank balance sheets, at their original value — and a significant amount of the banks’ lost capital would be restored. Plus, the banks would receive, from most of the homeowners with subprime mortgages, up to 15 years of teaser-rate payments.
By solving the bank capital crisis immediately, this strategy would ensure that fewer families would lose their homes, that fewer neighborhoods would deteriorate because of abandoned housing and that, as a consequence, there would be less downward pressure on local real estate prices and property tax revenues.
Also important would be the impact on consumer confidence. Just as rising real estate prices had a positive effect on American consumers, declining real estate prices continue to undermine their confidence. Anything that helps slow the price decline by reducing the supply of housing for sale will be good for our economy.
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. That, in turn, would allow the other financial institutions to reinvest in other sectors of our economy.
I propose this idea not because it would benefit our bank — we own none of this troubled debt and, in recent years, have had insignificant losses from real estate lending — but only out of concern for the health of the global financial system. This plan is a way to use our nation’s strength, and not current tax dollars, to keep people in their homes and give banks the ability to resume lending. It requires only that we believe in the future of the American economy and the value of American homes 15 years from now. I do, and this is a belief our government should share.
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.