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Westlake Legal Group > Banking and Financial Institutions

Wells Fargo’s Ex-Chief Fined $17.5 Million Over Fake Accounts

Westlake Legal Group 23wells-facebookJumbo Wells Fargo’s Ex-Chief Fined $17.5 Million Over Fake Accounts Wells Fargo&Company Stumpf, John G Office of the Comptroller of the Currency Frauds and Swindling Fines (Penalties) Banking and Financial Institutions

In a rare example of personal accountability for corporate wrongdoing, Wells Fargo’s former chief executive, John G. Stumpf, was fined $17.5 million on Thursday by the bank’s main federal regulator, which also took punitive action against seven other executives for the bank’s toxic sales culture and illegal acts.

In a settlement with the Office of the Comptroller of the Currency, Mr. Stumpf also agreed to a lifetime ban from the banking industry for his role in the company’s misdeeds, which included foisting unwanted products and sham bank accounts on millions of customers. Two other former senior executives agreed to lesser fines and restrictions on their work in the industry, and the regulator said it was taking enforcement action against five others.

Regulators sharply rebuked the former leaders for favoring profits and other market rewards over protecting their customers.

“The bank had better tools and systems to detect employees who did not meet unreasonable sales goals than it did to catch employees who engaged in sales practices misconduct,” the office said.

All told, the regulator was seeking tens of millions of dollars in personal fines from the executives, who could face even more serious consequences: A Justice Department investigation into the actions of Wells Fargo and its leaders remains open.

While it is not unusual for companies to face regulatory or even criminal charges, senior executives — particularly chief executives — usually avoid personal repercussions. The largest American banks, for example, have all paid many billions of dollars to settle civil cases stemming from their mortgage securitization activities in the lead-up to the 2008 financial crisis, but their chief executives have not given up a penny to regulators.

The fine against Mr. Stumpf was the largest against an individual in the O.C.C.’s history, according to a spokesman for the office. But the regulator sought a larger penalty — a $25 million fine — from Carrie L. Tolstedt, the bank’s former retail banking leader, who is fighting the agency’s civil charges against her.

Ms. Tolstedt, who left the bank in 2016, “acted with the utmost integrity” and will be vindicated by “a full and fair examination of the facts,” her lawyer, Enu Mainigi, said in a statement.

Mr. Stumpf, in a sworn statement to the O.C.C., blamed Ms. Tolstedt and others for what he acknowledged was “systemic” misconduct throughout the bank.

Wells Fargo’s problems erupted into public view in late 2016, setting off a crisis that continues to reverberate more than three years later. Mr. Stumpf, the chief executive at the time, was quickly ousted. His successor, Timothy J. Sloan, resigned last year after failing to quell the bank’s turmoil.

The eight executives charged on Thursday “failed to adequately perform their duties and responsibilities” and contributed to problems that stretched back more than a decade, the regulator said.

Wells Fargo’s new chief executive, Charles W. Scharf, said in a memo to employees on Thursday that the bank would stop all payments to the former executives, if any were pending.

“This was inexcusable. Our customers and you all deserved more from the leadership of this company,” wrote Mr. Scharf, who joined Wells Fargo in October.

“We are reviewing today’s filings and will determine what, if any, further action by the company is appropriate with respect to any of the named individuals,” he added. “Wells Fargo will not make any remaining compensation payments that may be owed to these individuals while we review the filings.”

Wells Fargo has been operating since early 2018 under a set of growth restrictions imposed by the Federal Reserve, a rare move that has hobbled the bank’s turnaround efforts. It is one of a dozen enforcement actions that Wells Fargo is working to resolve, Mr. Scharf has said.

This is a developing story. Check back for updates.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Climate Change Could Blow Up the Economy. Banks Aren’t Ready.

Westlake Legal Group merlin_167625216_f9d54ac2-c793-4efe-be3d-4d4683e5610b-facebookJumbo Climate Change Could Blow Up the Economy. Banks Aren’t Ready. World Economic Forum Virtual Currency Villeroy de Galhau, Francois (1959- ) Subprime Mortgage Crisis Lagarde, Christine Inflation (Economics) Global Warming Frankfurt (Germany) Facebook Inc European Central Bank Electric and Hybrid Vehicles Davos (Switzerland) Basel (Switzerland) Banking and Financial Institutions Bank for International Settlements

FRANKFURT — Climate change has already been blamed for deadly bush fires in Australia, dying coral reefs, rising sea levels and ever more cataclysmic storms. Could it also cause the next financial crisis?

A report issued this week by an umbrella organization for the world’s central banks argued that the answer is yes, while warning that central bankers lack tools to deal with what it says could be one of the biggest economic dislocations of all time.

The book-length report, published by the Bank for International Settlements in Basel, Switzerland, signals what could be the overriding theme for central banks in the decade to come.

“Climate change poses unprecedented challenges to human societies, and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us,” François Villeroy de Galhau, governor of the Banque de France, said in the report.

Central banks spent much of the last 10 years hauling their economies out of a deep financial crisis that began in 2008. They may well spend the next decade coping with the disruptive effects of climate change and technology, the report said.

The European Central Bank, which on Thursday concluded a two-day meeting in Frankfurt focusing on monetary policy, is beginning to grapple with those challenges. The bank did not make any changes in interest rates or its economic stimulus program on Thursday. Instead, other issues are coming to the fore.

Christine Lagarde, the central bank’s president, who took office late last year, has pledged to put climate change on the bank’s agenda, and it was a topic of discussion at the last monetary policy meeting, in December.

Members of the European Central Bank’s governing council argued “that there was a need to step up efforts to understand the economic consequences of climate change,” according to the bank’s official account of the discussion.

Global warming will play a big role in the European Central Bank’s strategic review, a broad reassessment of the way the bank tries to manage inflation. For example, when trying to influence market interest rates, the bank could decide to stop buying bonds of corporations considered big producers of greenhouse gases.

This new awareness of the financial consequences of a hotter earth comes as central banks are contending with another new challenge: technologies that threaten their monopoly on issuing money and their power to combat a financial crisis.

Unofficial digital currencies like Bitcoin or Facebook’s Libra, which is still in the planning stages, bypass central banks and could undermine their control of the monetary system. The obvious solution is for central banks to get into the digital currency business themselves.

On Wednesday, the central banks of Canada, Britain, Japan, Sweden and Switzerland said they were working together with the Bank for International Settlements to figure out what would happen if they did just that.

It’s complicated, though.

Like cash, people can use digital currencies to pay other people directly, without a bank in the middle. Unlike cash, digital currencies allow person-to-person transactions to take place online.

Such a system could be more efficient, but also risky, according to a report issued on Wednesday by the World Economic Forum, the organization that stages the annual conclave in Davos.

Commercial banks might become superfluous, and fail. Central banks would in effect become giant retail banks. But they have no experience dealing with millions of individual customers and could be overwhelmed. If a central bank collapsed, so would the monetary system.

Climate change also takes central banks into uncharted territory. Think the subprime crisis in 2008 was bad? Imagine a real estate crisis caused by rising sea levels and coastal flooding that renders thousands of square miles of land uninhabitable or useless for farming.

By some estimates, global gross domestic product could plunge by 25 percent because of the effects of climate change. Central banks have enough trouble dealing with mild recessions, and would not be powerful enough to combat an economic downturn of that scale.

“In the worst case scenario, central banks may have to intervene as climate rescuers of last resort or as some sort of collective insurer for climate damages,” according to the report, published by the Bank for International Settlements, a clearinghouse for the world’s major central banks.

It suggested some precautionary measures central banks could take.

Central banks, which often function as bank regulators, could require lenders to hold more capital if they hold assets vulnerable to the economic effects of a shift to renewable energy. An example might be a bank that has lent a lot of money to fossil fuel companies, or to the Saudi government.

The auto industry already illustrates how investors are moving their money away from companies seen as polluters and into companies seen as green, with disruptive effects on economies. Tesla’s value on the stock market is more than $100 billion, second only to Toyota among carmakers.

In this way, Tesla is being rewarded for producing emission-free electric vehicles. But the migration of capital away from the established manufacturers makes it difficult for them to invest in new technology, and threatens massive job losses and social and political upheaval.

Central banks need to coordinate their policies to deal with these new challenges, according to the Bank for International Settlements report. Unfortunately, coordination is not something that central banks are very good at right now.

“Climate change is a global problem that demands a global solution,” the paper said. But it added that “monetary policy seems, currently, to be difficult to coordinate between countries.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Climate Change Could Cause the Next Financial Meltdown

Westlake Legal Group merlin_167625216_f9d54ac2-c793-4efe-be3d-4d4683e5610b-facebookJumbo Climate Change Could Cause the Next Financial Meltdown World Economic Forum Virtual Currency Villeroy de Galhau, Francois (1959- ) Subprime Mortgage Crisis Lagarde, Christine Inflation (Economics) Global Warming Frankfurt (Germany) Facebook Inc European Central Bank Electric and Hybrid Vehicles Davos (Switzerland) Basel (Switzerland) Banking and Financial Institutions Bank for International Settlements

FRANKFURT — Climate change has already been blamed for deadly bush fires in Australia, dying coral reefs, rising sea levels and ever more cataclysmic storms. Could it also cause the next financial crisis?

A report issued this week by an umbrella organization for the world’s central banks argued that the answer is yes, while warning that central bankers lack tools to deal with what it says could be one of the biggest economic dislocations of all time.

The book-length report, published by the Bank for International Settlements in Basel, Switzerland, signals what could be the overriding theme for central banks in the decade to come.

“Climate change poses unprecedented challenges to human societies, and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us,” François Villeroy de Galhau, governor of the Banque de France, said in the report.

Central banks spent much of the last 10 years hauling their economies out of a deep financial crisis that began in 2008. They may well spend the next decade coping with the disruptive effects of climate change and technology, the report said.

The European Central Bank, which on Thursday concluded a two-day meeting in Frankfurt focusing on monetary policy, is beginning to grapple with those challenges. The bank did not make any changes in interest rates or its economic stimulus program on Thursday. Instead, other issues are coming to the fore.

Christine Lagarde, the central bank’s president, who took office late last year, has pledged to put climate change on the bank’s agenda, and it was a topic of discussion at the last monetary policy meeting, in December.

Members of the European Central Bank’s governing council argued “that there was a need to step up efforts to understand the economic consequences of climate change,” according to the bank’s official account of the discussion.

Global warming will play a big role in the European Central Bank’s strategic review, a broad reassessment of the way the bank tries to manage inflation. For example, when trying to influence market interest rates, the bank could decide to stop buying bonds of corporations considered big producers of greenhouse gases.

This new awareness of the financial consequences of a hotter earth comes as central banks are contending with another new challenge: technologies that threaten their monopoly on issuing money and their power to combat a financial crisis.

Unofficial digital currencies like Bitcoin or Facebook’s Libra, which is still in the planning stages, bypass central banks and could undermine their control of the monetary system. The obvious solution is for central banks to get into the digital currency business themselves.

On Wednesday, the central banks of Canada, Britain, Japan, Sweden and Switzerland said they were working together with the Bank for International Settlements to figure out what would happen if they did just that.

It’s complicated, though.

Like cash, people can use digital currencies to pay other people directly, without a bank in the middle. Unlike cash, digital currencies allow person-to-person transactions to take place online.

Such a system could be more efficient, but also risky, according to a report issued on Wednesday by the World Economic Forum, the organization that stages the annual conclave in Davos.

Commercial banks might become superfluous, and fail. Central banks would in effect become giant retail banks. But they have no experience dealing with millions of individual customers and could be overwhelmed. If a central bank collapsed, so would the monetary system.

Climate change also takes central banks into uncharted territory. Think the subprime crisis in 2008 was bad? Imagine a real estate crisis caused by rising sea levels and coastal flooding that renders thousands of square miles of land uninhabitable or useless for farming.

By some estimates, global gross domestic product could plunge by 25 percent because of the effects of climate change. Central banks have enough trouble dealing with mild recessions, and would not be powerful enough to combat an economic downturn of that scale.

“In the worst case scenario, central banks may have to intervene as climate rescuers of last resort or as some sort of collective insurer for climate damages,” according to the report, published by the Bank for International Settlements, a clearinghouse for the world’s major central banks.

It suggested some precautionary measures central banks could take.

Central banks, which often function as bank regulators, could require lenders to hold more capital if they hold assets vulnerable to the economic effects of a shift to renewable energy. An example might be a bank that has lent a lot of money to fossil fuel companies, or to the Saudi government.

The auto industry already illustrates how investors are moving their money away from companies seen as polluters and into companies seen as green, with disruptive effects on economies. Tesla’s value on the stock market is more than $100 billion, second only to Toyota among carmakers.

In this way, Tesla is being rewarded for producing emission-free electric vehicles. But the migration of capital away from the established manufacturers makes it difficult for them to invest in new technology, and threatens massive job losses and social and political upheaval.

Central banks need to coordinate their policies to deal with these new challenges, according to the Bank for International Settlements report. Unfortunately, coordination is not something that central banks are very good at right now.

“Climate change is a global problem that demands a global solution,” the paper said. But it added that “monetary policy seems, currently, to be difficult to coordinate between countries.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Climate Change Could Cause the Next Financial Meltdown

Westlake Legal Group merlin_167625216_f9d54ac2-c793-4efe-be3d-4d4683e5610b-facebookJumbo Climate Change Could Cause the Next Financial Meltdown World Economic Forum Virtual Currency Villeroy de Galhau, Francois (1959- ) Subprime Mortgage Crisis Lagarde, Christine Inflation (Economics) Global Warming Frankfurt (Germany) Facebook Inc European Central Bank Electric and Hybrid Vehicles Davos (Switzerland) Basel (Switzerland) Banking and Financial Institutions Bank for International Settlements

FRANKFURT — Climate change has already been blamed for deadly bush fires in Australia, dying coral reefs, rising sea levels and ever more cataclysmic storms. Could it also cause the next financial crisis?

A report issued this week by an umbrella organization for the world’s central banks argued that the answer is yes, while warning that central bankers lack tools to deal with what it says could be one of the biggest economic dislocations of all time.

The book-length report, published by the Bank for International Settlements in Basel, Switzerland, signals what could be the overriding theme for central banks in the decade to come.

“Climate change poses unprecedented challenges to human societies, and our community of central banks and supervisors cannot consider itself immune to the risks ahead of us,” François Villeroy de Galhau, governor of the Banque de France, said in the report.

Central banks spent much of the last 10 years hauling their economies out of a deep financial crisis that began in 2008. They may well spend the next decade coping with the disruptive effects of climate change and technology, the report said.

The European Central Bank, which on Thursday concluded a two-day meeting in Frankfurt focusing on monetary policy, is beginning to grapple with those challenges. The bank did not make any changes in interest rates or its economic stimulus program on Thursday. Instead, other issues are coming to the fore.

Christine Lagarde, the central bank’s president, who took office late last year, has pledged to put climate change on the bank’s agenda, and it was a topic of discussion at the last monetary policy meeting, in December.

Members of the European Central Bank’s governing council argued “that there was a need to step up efforts to understand the economic consequences of climate change,” according to the bank’s official account of the discussion.

Global warming will play a big role in the European Central Bank’s strategic review, a broad reassessment of the way the bank tries to manage inflation. For example, when trying to influence market interest rates, the bank could decide to stop buying bonds of corporations considered big producers of greenhouse gases.

This new awareness of the financial consequences of a hotter earth comes as central banks are contending with another new challenge: technologies that threaten their monopoly on issuing money and their power to combat a financial crisis.

Unofficial digital currencies like Bitcoin or Facebook’s Libra, which is still in the planning stages, bypass central banks and could undermine their control of the monetary system. The obvious solution is for central banks to get into the digital currency business themselves.

On Wednesday, the central banks of Canada, Britain, Japan, Sweden and Switzerland said they were working together with the Bank for International Settlements to figure out what would happen if they did just that.

It’s complicated, though.

Like cash, people can use digital currencies to pay other people directly, without a bank in the middle. Unlike cash, digital currencies allow person-to-person transactions to take place online.

Such a system could be more efficient, but also risky, according to a report issued on Wednesday by the World Economic Forum, the organization that stages the annual conclave in Davos.

Commercial banks might become superfluous, and fail. Central banks would in effect become giant retail banks. But they have no experience dealing with millions of individual customers and could be overwhelmed. If a central bank collapsed, so would the monetary system.

Climate change also takes central banks into uncharted territory. Think the subprime crisis in 2008 was bad? Imagine a real estate crisis caused by rising sea levels and coastal flooding that renders thousands of square miles of land uninhabitable or useless for farming.

By some estimates, global gross domestic product could plunge by 25 percent because of the effects of climate change. Central banks have enough trouble dealing with mild recessions, and would not be powerful enough to combat an economic downturn of that scale.

“In the worst case scenario, central banks may have to intervene as climate rescuers of last resort or as some sort of collective insurer for climate damages,” according to the report, published by the Bank for International Settlements, a clearinghouse for the world’s major central banks.

It suggested some precautionary measures central banks could take.

Central banks, which often function as bank regulators, could require lenders to hold more capital if they hold assets vulnerable to the economic effects of a shift to renewable energy. An example might be a bank that has lent a lot of money to fossil fuel companies, or to the Saudi government.

The auto industry already illustrates how investors are moving their money away from companies seen as polluters and into companies seen as green, with disruptive effects on economies. Tesla’s value on the stock market is more than $100 billion, second only to Toyota among carmakers.

In this way, Tesla is being rewarded for producing emission-free electric vehicles. But the migration of capital away from the established manufacturers makes it difficult for them to invest in new technology, and threatens massive job losses and social and political upheaval.

Central banks need to coordinate their policies to deal with these new challenges, according to the Bank for International Settlements report. Unfortunately, coordination is not something that central banks are very good at right now.

“Climate change is a global problem that demands a global solution,” the paper said. But it added that “monetary policy seems, currently, to be difficult to coordinate between countries.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Iran’s Grim Economy Limits Its Willingness to Confront the U.S.

Westlake Legal Group xxiranecon-facebookJumbo Iran’s Grim Economy Limits Its Willingness to Confront the U.S. United States International Relations United States Trump, Donald J Suleimani, Qassim Middle East Iran International Trade and World Market Embargoes and Sanctions Economic Conditions and Trends Demonstrations, Protests and Riots Banking and Financial Institutions

LONDON — Iran is caught in a wretched economic crisis. Jobs are scarce. Prices for food and other necessities are skyrocketing. The economy is rapidly shrinking. Iranians are increasingly disgusted.

Crippling sanctions imposed by the Trump administration have severed Iran’s access to international markets, decimating the economy, which is now contracting at an alarming 9.5 percent annual rate, the International Monetary Fund estimated. Oil exports were effectively zero in December, according to Oxford Economics, as the sanctions have prevented sales, even though smugglers have transported unknown volumes.

The bleak economy appears to be tempering the willingness of Iran to escalate hostilities with the United States, its leaders cognizant that war could profoundly worsen national fortunes. In recent months, public anger over joblessness, economic anxiety and corruption has emerged as a potentially existential threat to Iran’s hard-line regime.

Only a week ago, such sentiments had been redirected by outrage over the Trump administration’s Jan. 3 killing of Iran’s top military commander, Maj. Gen. Qassim Suleimani. But protests flared anew over the weekend in Tehran, and then continued on Monday, following the government’s astonishing admission that it was — despite three days of denial — responsible for shooting down a Ukrainian jetliner.

The demonstrations were most pointedly an expression of contempt for the regime’s cover-up following its downing of the Ukrainian jet, which killed all 176 people on board. But the fury in the streets resonated as a rebuke for broader grievances — diminishing livelihoods, financial anxiety and the sense that the regime is at best impotent in the face of formidable troubles.

Inflation is running near 40 percent, assailing consumers with sharply rising prices for food and other basic necessities. More than one in four young Iranians is jobless, with college graduates especially short of work, according to the World Bank.

The missile strikes that Iran unleashed on American bases in Iraq last week in response to Gen. Suleimani’s killing appeared calibrated to enable its leaders to declare that vengeance had been secured without provoking an extreme response from President Trump, such as aerial bombing.

Hostilities with the most powerful military on earth would make life even more punishing for ordinary Iranians. It would likely weaken the currency and exacerbate inflation, while menacing what remains of national industry, eliminating jobs and reinvigorating public pressure on the leadership.

Conflict could threaten a run on domestic banks by sending more companies into distress. Iranian companies have been spared from collapse by surges of credit from banks. The government controls about 70 percent of banking assets, according to a paper by Adnan Mazarei, a former I.M.F. deputy director and now a senior fellow at the Peterson Institute for International Economics in Washington. Roughly half of all bank loans are in arrears, Iran’s Parliament has estimated.

Many Iranian companies depend on imported goods to make and sell products, from machinery to steel to grain. If Iran’s currency declines further, those companies would have to pay more for such goods. Banks would either have to extend more loans, or businesses would collapse, adding to the ranks of the jobless.

The central bank has been financing government spending, filling holes in a tattered budget to limit public ire over cuts. That entails printing Iranian money, adding to the strains on the currency. A war could prompt wealthier Iranians to yank assets out of the country, threatening a further decline in the currency and producing runaway inflation.

In sum, this is the unpalatable choice confronting the Iranian leadership: It can keep the economy going by continuing to steer credit to banks and industry, adding to the risks of an eventual banking disaster and hyperinflation. Or it can opt for austerity that would cause immediate public suffering, threatening more street demonstrations.

“That is the specter hanging over the Iranian economy,” Mr. Mazarei said. “The current economic situation is not sustainable.”

Though such realities appear to be limiting Iran’s appetite for escalation, some experts suggest that the regime’s hard-liners may eventually come to embrace hostilities with the United States as a means of stimulating the anemic economy.

Cut off from international investors and markets, Iran has in recent years focused on forging a so-called resistance economy in which the state has invested aggressively, subsidizing strategic industries, while seeking to substitute domestic production for imported goods.

That strategy has been inefficient, say economists, adding to the strains on Iran’s budget and the banking system, but it appears to have raised employment. Hard-liners might come see a fight with Iran’s archenemy, the United States, as an opportunity to expand the resistance economy while stoking politically useful nationalist anger.

“There will be those who will argue that we can’t sustain the current situation if we don’t have a war,” said Yassamine Mather, a political economist at the University of Oxford. “For the Iranian government, living in crisis is good. It’s always been good, because you can blame all the economic problems on sanctions, or on the foreign threat of war. In the last couple of years, Iran has looked for adventures as a way of diverting attention from economic problems.”

How ever Iran’s leaders proceed, experts assume that economic concerns will not be paramount: Iran’s leaders prioritize one goal above all others — their own survival. If confrontation with outside powers appears promising as a means of reinforcing their hold on power, the leadership may accept economic pain as a necessary cost.

“The hard-liners are willing to impoverish people to stay in power,” said Sanam Vakil, deputy director of the Middle East and North Africa program at Chatham House, a research institution in London. “The Islamic Republic does not make decisions based on purely economic outcomes.”

But Iran’s leaders need only survey their own region to recognize the dangers that economic distress can pose to established powers. In recent months, Iraq and Lebanon have seen furious demonstrations fueled in part by declining living standards amid corruption and abuse of power.

As recently as November, Iran’s perilous economic state appeared to pose a foundational threat to the regime. As the government scrambled to secure cash to finance aid for the poor and the jobless, it scrapped subsidies on gasoline, sending the price of fuel soaring by as much as 200 percent. That spurred angry protests in the streets of Iranian cities, with demonstrators openly calling for the expulsion of President Hassan Rouhani.

“That’s a sign of how much pressure they are under,” said Maya Senussi, a Middle East expert at Oxford Economics in London.

In unleashing the drone strike that killed General Suleimani, Mr. Trump effectively relieved the leadership of that pressure, undercutting the force of his own sanctions, say experts.

Within Iran, the killing resounded as a breach of national sovereignty and evidence that the United States bore malevolent intent. It muted the complaints that propelled November’s demonstrations — laments over rising prices, accusations of corruption and economic malpractice amid the leadership — replacing them with mourning for a man celebrated as a national hero.

A country fraught with grievances aimed directly at its senior leaders had seemingly been united in anger at the United States.

“The killing of Suleimani represents a watershed, not only in terms of directing attention away from domestic problems, but also rallying Iranians around their flag,” said Fawaz A. Gerges, a professor of international relations at the London School of Economics.

Mr. Trump had supplied the Iranian leadership “time and space to change the conversation,” he added. Iranians were no longer consumed with the “misguided and failed economic policies of the Iranian regime,” but rather “the arrogant aggression of the United States against the Iranian nation.”

But then came the government’s admission that it was responsible for bringing down the Ukrainian passenger jet. Now, Iran’s leaders again find themselves on the wrong end of angry street demonstrations.

For now, the regime is seeking to quash the demonstrations with riot police and admonitions to the protesters to go home. But if public rage continues, hard-liners may resort to challenging American interests in the hopes that confrontation will force Mr. Trump to negotiate a deal toward eliminating the sanctions.

Iran may threaten the passage of ships carrying oil through the Strait of Hormuz, the passageway for more than one-fifth of the world’s consumption of liquid petroleum. Disruption there would restrict the global supply oil, raising the price of the vital commodity. That could sow alarm in world markets while limiting global economic growth, potentially jeopardizing Mr. Trump’s re-election bid, as the logic goes.

Iran previously had a different pathway toward gaining relief from the sanctions: Under a 2015 deal forged by President Barack Obama, the sanctions were removed in exchange for Iran’s verified promise to dismantle large sections of its nuclear program.

But when Mr. Trump took office, he renounced that deal and resumed sanctions.

The Iranian leadership has courted European support for a resumption of the nuclear deal, seeking to exploit divergence between Europe and the United States. The Europeans have been unhappy about Mr. Trump’s renewed sanctions, which have dashed the hopes of German, French and Italian companies that had looked to Iran for expanded business opportunities.

Whatever comes next, Iran’s leadership is painfully aware that getting out from under the American sanctions is the only route to lifting its economy, say experts.

The nuclear deal was intended to give Iran’s leaders an incentive to diminish hostility as a means of seeking liberation from the sanctions. Mr. Trump’s abandonment of the deal effectively left them with only one means of pursuing that goal — confrontation.

“They see escalation as the only way to the negotiating table,” said Ms. Vakil. “They can’t capitulate and come to the negotiating table. They can’t compromise, because that would show weakness. By demonstrating that they can escalate, that they are fearless, they are trying to build leverage.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

The Economy Is Expanding. Why Are Economists So Glum?

Westlake Legal Group 08DC-ECON-02-facebookJumbo The Economy Is Expanding. Why Are Economists So Glum? Wages and Salaries United States Economy Unemployment Taxation Recession and Depression Productivity National Debt (US) International Trade and World Market Interest Rates Inflation (Economics) Immigration and Emigration Federal Taxes (US) Federal Budget (US) Economic Conditions and Trends Banking and Financial Institutions

SAN DIEGO — The mood among economic forecasters gathered for their annual meeting last weekend was dark. They warned one another about President Trump’s trade war, about government budget deficits and, repeatedly, about the inability of central banks to fully combat another recession should one sweep the globe anytime soon.

Among the thousands of economists gathered for the profession’s annual meeting, there was little celebration of Mr. Trump’s economic policies, even though unemployment is at a 50-year low, wages are rising and the economy is experiencing its longest expansion on record.

Underlying their sense of foreboding was a widespread sentiment that the current expansion is built on a potentially shaky combination of high deficits and low interest rates — and when it ends, as it is bound to do eventually, it could do so painfully.

Those concerns were echoed on Wednesday by economists at the World Bank, who called the worldwide expansion “fragile” in their latest “Global Economic Prospects” report. The report forecasts a slight uptick in growth in 2020 after a sluggish year bogged down by trade tensions and weak investment. But it said “downside risks predominate,” including the potential escalation of trade fights, sharp slowdowns in the United States and other wealthy countries and financial disruptions in emerging markets like China and India.

“The materialization of these risks would test the ability of policymakers to respond effectively to negative events,” the report by the bank, which is led by David Malpass, a former Trump administration official, stated.

The bank’s warnings echoed the fears expressed by many economists in San Diego, both in small research-paper presentations and in ballroom discussions of the clouds on the global economic horizon.

Trade tensions between the United States and China have cooled at least temporarily, but they are escalating across the Atlantic as European nations begin to impose new taxes on technology companies that are largely based in the United States. Mr. Trump has already threatened tariffs on French goods in retaliation for a tech tax, and many analysts worry that separate trade talks between the United States and the European Union could end in a tariff war. Manufacturing is mired in a global slowdown, with the sector contracting in the United States.

At a packed room in San Diego last week, researchers presented estimates that tariffs imposed by the United States and China — which remain in place despite the recent truce in trade talks — have reduced wages for workers in both countries already.

The American economy appears to have grown by a little more than 2 percent in 2019, though the statistics are not yet fully compiled. That is likely to be the slowest rate of Mr. Trump’s presidency, and well below the growth he promised that his economic and regulatory policies would produce.

The World Bank estimates growth in the United States will slow to 1.8 percent this year and 1.7 percent next year. That would be nearly the lowest annual rate since the last recession ended in mid-2009. The bank said the forecast reflected fading stimulus from Mr. Trump’s signature 2017 tax cuts and from government spending increases he has signed into law.

The cuts, and to a lesser degree the additional spending, have helped push the federal budget deficit to nearly $1 trillion a year, even as unemployment lingers near a half-century low. Fiscal deficits remain high in several other wealthy nations, particularly given how far into an economic expansion those countries are.

Interest rates have been dropping across advanced economies, thanks to long-running trends like population aging. That leaves central banks — which usually stoke growth by making borrowing cheaper — with far less conventional power in a recession.

Economists have been “going through the stages of grief” as they accept that such low rates are likely to prevail, John C. Williams, who leads the Federal Reserve Bank of New York, said at the weekend’s gathering.

After the 2007-09 recession, economists speculated that the conditions that plagued developed nations — low growth, low inflation and low interest rates — would be short-lived. Scars were still healing after the worst downturn since the Great Depression, they thought.

That view has slowly been replaced by a more pessimistic one, as the field acknowledged that economic gains were likely to remain muted across advanced countries. In 2019, the Fed had to step back from plans to raise rates further and cut borrowing costs instead, leaving its policy rate at less than half of its 2007 level and underlining just how diminished the new normal looks.

“It’s clear that more was, and still is, going on,” Janet L. Yellen, the former Federal Reserve chair said at the event. “Although monetary policy has a meaningful role to play in addressing future downturns, it is unlikely to be sufficient in years ahead for several reasons.”

Ms. Yellen emphasized that government spending would need to play a larger role in combating future downturns, calling for stronger automatic stabilizers, which increase government spending when the economy weakens and tax receipts fall. There is no imminent sign that Congress is ready to enact such policies, but hope for government action was a constant refrain in San Diego.

Sluggish growth in worker productivity has held back the economy, said Valerie A. Ramey, an economist at the University of California, San Diego. She called on lawmakers to increase spending on infrastructure and research and development in order to spur a productivity acceleration.

Ms. Yellen, who assumed the presidency of the American Economic Association at the meeting, oversaw its program of panels and presentations, assembling a lineup that included several papers assessing damage from tariffs and the trade war. She said she and her colleagues rejected four proposals for every five that were submitted, choosing some that showed the benefits to advanced economies of attracting immigrants, particularly highly skilled ones, in stark contrast to Mr. Trump’s hard line on immigration to the United States.

Few of the papers presented assessed Mr. Trump’s tax law, and none of them argued, as Mr. Trump’s advisers did at similar conferences in recent years, that the tax cuts were supercharging investment.

In an interview on Saturday morning, over a buffet breakfast in a hotel restaurant with a view of the swimming pool, Ms. Yellen said that she had a reason for picking the sessions she did, calling low interest rates the macroeconomic “issue of our times.” She said she shared other economists’ concerns about trade and economic policy in the current environment.

“You do see a number of sessions in the program about this,” Ms. Yellen said. “I organized the program, and I think it’s not an accident you’re seeing it. I think it’s very important.”

Ben S. Bernanke, who was Fed chair during the 2007-09 recession, told the conference that a juiced-up monetary policy arsenal should be enough to combat the next downturn.

But “on one point we can be certain: The old methods won’t do,” he said. The Fed will need to use bond-buying and other tricks to supplement rate cuts.

And even economists’ most hopeful takes had a gray lining. Mr. Bernanke’s relative optimism hinged on the idea that interest rates would not continue to fall. Ms. Yellen’s hope for the future turned on greater activism from politicians to fight recessions.

If those things do not happen? The United States could look more like Japan, where inflation has slipped much lower, rates are rock bottom and the budget deficit much larger.

In good times, said Adam S. Posen, president of the Peterson Institute for International Economics, that may not be the worst outcome. In a recession, though, the nation’s example may offer bad news. In the years since the financial crisis, Japan has rolled out an extremely active economic policy — both monetary and fiscal — to move its inflation rate back up, and it has succeeded only in averting outright price declines.

“It is wise to be cautious, and not assume that they will be as effective as we think,” Mr. Posen said of monetary policies. “We need to think about different ways of doing fiscal-monetary coordination.”

And while some economists, such as Harvard’s Lawrence H. Summers, extolled high fiscal deficits as a necessary weapon against slowdown or recession, others, such as Harvard’s N. Gregory Mankiw and Kenneth Rogoff and Stanford’s Michael J. Boskin, presented research warning that high levels of government debt could crimp growth.

Those papers echoed warnings that those economists issued earlier in the expansion that did not come to pass. But they argued that the large amounts of federal debt that has accumulated in the meantime posed a threat. In other words, the economists warned, it is only a matter of time.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Bank of England Audio Was Leaked, Giving Some Traders an Edge

Westlake Legal Group 19bankhack-facebookJumbo Bank of England Audio Was Leaked, Giving Some Traders an Edge Times of London Stocks and Bonds Interest Rates Financial Conduct Authority (Great Britain) Economic Conditions and Trends Carney, Mark J Banking and Financial Institutions Bank of England

LONDON — The Bank of England said Thursday that an audio feed from its news conferences had been released to some investors before it had been made public, giving them a leg up on the rest of the market.

The central bank said it was investigating how a third-party supplier had gotten early access to policymakers’ remarks since earlier this year. In the world of high-speed trading, just a few seconds’ lead time can offer some investors a trading advantage.

The Financial Conduct Authority, which regulates Britain’s financial markets, also said it was investigating the leak.

Any trades made on the basis of leaked information or insider dealing would come under the review of the Financial Conduct Authority, which has a mandate to insure that competition in the markets is respected.

A spokeswoman for the agency said in an email that it was looking into the Bank of England leak, but declined to comment on whether any trading had occurred on the basis of the leaked information.

After queries from The Times of London, the bank said the audio feed of its news conferences, which is used as a backup in case the video feed fails, had been “misused by a third-party supplier to the bank since earlier this year to supply services to other external clients.”

The audio feed provides traders a five- to eight-second advantage over the video feed, The Times reported.

Bloomberg said that it was the manager of the video feed and that it made it available to other news providers. The Bank of England did not identify the supplier of the audio feed, but said that it had disabled the supplier’s access. “As a result, the third-party supplier did not have any access to the most recent press conference and will no longer play any part in any of the bank’s future press conferences,” it said in a statement.

“The bank operates the highest standards of information security around the release of the market sensitive decisions of its policy committees,” the statement added. “The issue identified related only to the broadcast of press conferences that follow such statements.”

The disclosure came before the bank’s scheduled release of a monetary policy statement at noon on Thursday, to be followed by a news conference by the bank’s governor, Mark Carney. Mr. Carney, who has headed the Bank of England since 2013, is scheduled to step down Jan. 31.

Comments from the Bank of England’s news conferences are closely monitored for indications about the bank’s thinking on interest rates and the state of the economy.

The bank routinely puts reporters through tight precautions to prevent leaks that could prove valuable to traders. Before they are allowed to view policy announcements and forecasts ahead of their release, reporters are locked in a room with a security guard standing by and cellphone connectivity is cut. They are not allowed to leave the room until after the embargo is lifted.

Premature access to potentially market-moving information is a crucial concern to financial regulators around the world. In a 2015 case, prosecutors and regulators in the United States asserted that 32 traders and hackers had reaped more than $100 million in illegal proceeds from a scheme that provided a look at corporate news releases before they were made public.

Elian Peltier contributed reporting.

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Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Mortgage Rates Below 1% Put Europe on Alert for Housing Bubble

PARIS — Europe’s economy is struggling to gain traction after years of anemic growth. But the rock-bottom interest rates meant to power a recovery are fueling a property boom that is creating a new set of problems.

Money is so cheap — a 20-year mortgage can be had in Paris or Frankfurt at a rate of less than 1 percent — that borrowers are flocking to buy apartments and houses. And institutional investors, seeing a chance for lucrative returns, are acquiring swaths of residential real estate in cities across Europe.

In some parts of Europe, said Jörg Krämer, the chief economist at Commerzbank in Frankfurt, valuations have already returned to or exceeded levels that preceded the Continent’s debt crisis a decade ago, igniting concerns that the property boom could end badly.

“The risks are real, because negative interest rates in Europe are cemented,” Mr. Krämer said. “What’s important for the economy as a whole is to prevent the emergence of a dangerous new bubble.”

Demand has surged in the five years since the European Central Bank pushed one of its benchmark interest rates below zero, a step never before tried on such a scale. Prices jumped at least 30 percent in Frankfurt, Amsterdam, Stockholm, Madrid and other metropolitan hot spots, and are up an average of over 40 percent in Portugal, Luxembourg, Slovakia and Ireland.

That has made homeownership increasingly unaffordable for most anyone except high earners, while also driving up rents, pushing working class people farther from urban centers. A political backlash is unfolding as European mayors intervene in the market with rent controls, higher property taxes and subsidized housing programs.

“It plays into a sense of social distress,” said Loïc Bonneval, a sociologist at the Max Weber Center in Lyon, a social research organization.

While low rates helped produce a rebound in the eurozone, economists say the policies now appear to be doing more harm than good, clouding the bank’s efforts to reverse inequality. They have not resolved fundamental problems like weak business investment. Nor have they revived inflation — which helps lift wages — anywhere but in the housing market.

“The dynamics have totally changed in a short period of time,” said Matthias Holzhey, the head of Swiss real estate at UBS and the lead author of an annual report on property price spikes in major global cities. In some parts of Europe, he said, “low rates are pushing real estate valuations into the bubble risk zone.”

Financial authorities are on alert. In September, the European Systemic Risk Board, an arm of the European Central Bank that helps regulate Europe’s financial system, called on 11 countries including Luxembourg, Austria, Denmark and Sweden to pursue regulations and tax measures meant to rein in prices and promote housing affordability and availability.

In Europe, Cheap Money Is Fueling a Worrisome Property Boom

Westlake Legal Group 12TK-biz-web-BUBBLE-Artboard_2 Mortgage Rates Below 1% Put Europe on Alert for Housing Bubble Rent Control and Stabilization Real Estate and Housing (Residential) Prices (Fares, Fees and Rates) Mortgages Interest Rates European Central Bank Europe Banking and Financial Institutions

Housing prices have increased . . .

Change in housing price index

. . . while incomes have lagged . . .

Change in per capita disposable income

. . . and borrowing costs are at record lows.

Cost of household borrowing for house purchases

Top 7 cities at risk of a housing bubble

UBS Global Real Estate Bubble Index, 2019

Westlake Legal Group 12TK-biz-web-BUBBLE-Artboard_3 Mortgage Rates Below 1% Put Europe on Alert for Housing Bubble Rent Control and Stabilization Real Estate and Housing (Residential) Prices (Fares, Fees and Rates) Mortgages Interest Rates European Central Bank Europe Banking and Financial Institutions

Housing prices have increased . . .

. . . while incomes have lagged . . .

Change in housing price index

Change in per capita disposable income

. . . and borrowing costs are at record lows.

Top 7 cities at risk of a housing bubble

Cost of household borrowing for house purchases

UBS Global Real Estate Bubble Index, 2019

Sources: Eurostat (housing price index, income); European Central Bank (borrowing cost); UBS (real estate bubble index) | By The New York Times

The Bundesbank, Germany’s central bank, said recently that real estate in German cities had been overvalued by 15 to 30 percent — in other words, that there is a bubble. The UBS survey cited Munich, Frankfurt, Amsterdam and Paris as cities at risk. And a study by the global accounting firm Deloitte & Touche cautioned that average house prices “will exceed pre-crisis levels” if the European Central Bank keeps interest rates at zero, as planned.

Housing prices have risen sharply in the United States as well. But there, the boom has been driven by individual buyers, household debt has been held in check and lending standards have remained relatively tight — all factors that reduce the chance of another collapse. Moreover, while benchmark interest rates in the United States have been kept low, they were never negative — and have now been above zero for several years.

Some economists say that the concerns in Europe are overblown and that prices are overvalued but not in a danger zone. For one thing, job creation from the economic recovery, however tepid or uneven, has expanded the ranks of creditworthy borrowers. And buyers are mainly living in properties or renting them out, rather than flipping them as happened before the crisis.

The supply of urban housing, however, has failed to keep pace with the resulting demand. Disrupters like Airbnb have added to the crunch by converting residential properties into vacation stays. The result is a shortage of affordable housing, particularly in the rental sector, squeezing middle and low-income earners such as teachers, firefighters, nurses and retail employees who work in cities but cannot afford to live in them.

The dynamics are worsening as deep-pocketed domestic and foreign investors pivot from focusing almost exclusively on commercial real estate to acquiring residential housing around Europe. Pension and insurance funds, which typically invest in government bonds, have found it impossible to make money off countries like Germany, where the interest rate paid is less than zero. That has driven them into real estate funds, which offer high returns in comparison to bonds.

Rents and mortgages consume a quarter of monthly income on average, up from 17 percent two decades ago, according to data compiled by Housing Europe, a federation of affordable-housing groups. One-tenth of Europeans spend over 40 percent of their income on housing. The rates are sharply higher for the poorest households.

“House prices have risen much faster than citizens’ incomes,” said Cédric Van Styvendael, the organization’s president. “It’s a problem for Europe.” Wages and salaries in the eurozone grew 2.7 percent in the three months to June in 2019 compared to a year earlier.

The scarcity of affordable housing is fueling resentment and political strife. In Madrid and Barcelona, home prices have jumped more than 30 percent since 2016, pushing rents up as landlords sought bigger returns. Prime Minister Pedro Sánchez capped rents in Spain this summer at the rate of inflation, now 0.4 percent, limiting income for property owners.

In Paris, where 70 percent of residents are renters, Mayor Anne Hidalgo imposed new rent controls. While rents are limited by strict housing regulations, they have risen 40 percent between 2000 and 2018. As property prices keep climbing — they recently broke a record of 10,000 euros on average per square meter, or about $1,000 per square foot, one of the highest prices in Europe — Ms. Hidalgo is taking other steps to prevent the city from becoming a “ghetto for the rich.” Her plans include building subsidized housing that families with modest incomes can purchase at half the market rate.

Few places have felt the impact as sharply as Berlin. Since the fall of the Berlin Wall 30 years ago, workers, artists and students have increasingly been displaced by an influx of young professionals with families. But property prices and rents have skyrocketed in recent years as home buyers and investors double down.

The city imposed a five-year rent freeze, the toughest in Europe, in the summer after rents jumped more than 50 percent in five years, and gave tenants the right to demand reductions if rents go too high. German real estate stocks have slumped since the ruling.

For Kathrin Hauer, 39, the measures are urgent. She was a student nearly two decades ago when she became a tenant in a World War II-era building formerly owned by the East German government, on Schönhauser Allee, a central street. Ms. Hauer, who works as a costume and set designer for German theaters, was long happy with her $450-a-month apartment, which was bought by a small group of investors after Communism.

Then in 2016, the building was sold to an investment company. Last December, right before a national law limiting rent increases was to take effect, the company announced major construction work that would raise rents on the low-income tenants by 250 percent. Ms. Hauer’s rent would surge above $1,500 a month, far more than she could afford.

“This is meant to scare us to get out,” Ms. Hauer said.

The tenants won an order from the city’s planning department to halt the renovations, which included large elevators, balconies and floor-to-ceiling windows. Soon after, in a move that tenants believe was a form of retaliation, Ms. Hauer said, the investors ordered all the trees in the interior courtyard to be razed, and hired a middleman to persuade tenants to agree to the renovations and accept buyouts.

Itai Amir, the director of the company that now owns the building, would not comment for this article.

Wibke Werner, the deputy director of Berliner Mieterverein, an association of Berlin renters with more 170,000 members, said that because of the low interest rates, investors were “betting on concrete gold.”

“These investments are designed to optimize returns,” she said, “which means rising rents and the crowding out of low-income households.”

In Denmark, which is not part of the euro but closely tracks E.C.B. monetary policy, benchmark interest rates have been negative for seven years. Seeking greater returns, some Danish pension funds are buying large holdings of prime real estate and new buildings to offer for rent. But rents have grown so high that the city is considering capping them, which could cut into those investments.

At the same time, rates are so low that bargains being offered by banks are hard to pass up. In August, Jyske Bank of Denmark began offering 10-year fixed-rate mortgages at negative 0.5 percent interest before fees, meaning the amount outstanding on the loan will be reduced each month by more than the borrower has paid. Nordea Bank is offering 20-year loans at zero interest.

While banks have stopped flooding mailboxes with credit card offers, a common practice before the debt crisis, offering ultracheap mortgage loans is a way of luring new customers.

That has tempted borrowers in the Netherlands to go to extremes. While Dutch banks took steps to curb lending this year, Dutch households held mortgage debt of 527 billion euros ($584 billion) at the end of March — equal to nearly two-thirds of the Dutch economy.

The Dutch central bank warned recently that “systemic risk” in the Dutch housing market posed the biggest threat to financial stability. A sudden fall in housing prices could be disastrous for households and banks, it said, because borrowers are overextended.

With little room to maneuver, the European Central Bank recently called on politicians in euro countries to take bolder steps to prevent asset bubbles from growing.

“This is all new territory,” Mr. Holzhey of UBS said. “Some caution is warranted because in the past, no one really forecast a house price crash,” he said.

“Headlines always said prices are rising, but there’s no bubble,” he added.

Until there was.

Christopher Schuetze contributed reporting from Berlin, Jack Ewing from Frankfurt and Ben Casselman from New York. Alain Delaquérière contributed research.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Mortgage Rates Below 1% Put Europe on Alert for Housing Bubble

PARIS — Europe’s economy is struggling to gain traction after years of anemic growth. But the rock-bottom interest rates meant to power a recovery are fueling a property boom that is creating a new set of problems.

Money is so cheap — a 20-year mortgage can be had in Paris or Frankfurt at a rate of less than 1 percent — that borrowers are flocking to buy apartments and houses. And institutional investors, seeing a chance for lucrative returns, are acquiring swaths of residential real estate in cities across Europe.

In some parts of Europe, said Jörg Krämer, the chief economist at Commerzbank in Frankfurt, valuations have already returned to or exceeded levels that preceded the Continent’s debt crisis a decade ago, igniting concerns that the property boom could end badly.

“The risks are real, because negative interest rates in Europe are cemented,” Mr. Krämer said. “What’s important for the economy as a whole is to prevent the emergence of a dangerous new bubble.”

Demand has surged in the five years since the European Central Bank pushed one of its benchmark interest rates below zero, a step never before tried on such a scale. Prices jumped at least 30 percent in Frankfurt, Amsterdam, Stockholm, Madrid and other metropolitan hot spots, and are up an average of over 40 percent in Portugal, Luxembourg, Slovakia and Ireland.

That has made homeownership increasingly unaffordable for most anyone except high earners, while also driving up rents, pushing working class people farther from urban centers. A political backlash is unfolding as European mayors intervene in the market with rent controls, higher property taxes and subsidized housing programs.

“It plays into a sense of social distress,” said Loïc Bonneval, a sociologist at the Max Weber Center in Lyon, a social research organization.

While low rates helped produce a rebound in the eurozone, economists say the policies now appear to be doing more harm than good, clouding the bank’s efforts to reverse inequality. They have not resolved fundamental problems like weak business investment. Nor have they revived inflation — which helps lift wages — anywhere but in the housing market.

“The dynamics have totally changed in a short period of time,” said Matthias Holzhey, the head of Swiss real estate at UBS and the lead author of an annual report on property price spikes in major global cities. In some parts of Europe, he said, “low rates are pushing real estate valuations into the bubble risk zone.”

Financial authorities are on alert. In September, the European Systemic Risk Board, an arm of the European Central Bank that helps regulate Europe’s financial system, called on 11 countries including Luxembourg, Austria, Denmark and Sweden to pursue regulations and tax measures meant to rein in prices and promote housing affordability and availability.

In Europe, Cheap Money Is Fueling a Worrisome Property Boom

Westlake Legal Group 12TK-biz-web-BUBBLE-Artboard_2 Mortgage Rates Below 1% Put Europe on Alert for Housing Bubble Rent Control and Stabilization Real Estate and Housing (Residential) Prices (Fares, Fees and Rates) Mortgages Interest Rates European Central Bank Europe Banking and Financial Institutions

Housing prices have increased . . .

Change in housing price index

. . . while incomes have lagged . . .

Change in per capita disposable income

. . . and borrowing costs are at record lows.

Cost of household borrowing for house purchases

Top 7 cities at risk of a housing bubble

UBS Global Real Estate Bubble Index, 2019

Westlake Legal Group 12TK-biz-web-BUBBLE-Artboard_3 Mortgage Rates Below 1% Put Europe on Alert for Housing Bubble Rent Control and Stabilization Real Estate and Housing (Residential) Prices (Fares, Fees and Rates) Mortgages Interest Rates European Central Bank Europe Banking and Financial Institutions

Housing prices have increased . . .

. . . while incomes have lagged . . .

Change in housing price index

Change in per capita disposable income

. . . and borrowing costs are at record lows.

Top 7 cities at risk of a housing bubble

Cost of household borrowing for house purchases

UBS Global Real Estate Bubble Index, 2019

Sources: Eurostat (housing price index, income); European Central Bank (borrowing cost); UBS (real estate bubble index) | By The New York Times

The Bundesbank, Germany’s central bank, said recently that real estate in German cities had been overvalued by 15 to 30 percent — in other words, that there is a bubble. The UBS survey cited Munich, Frankfurt, Amsterdam and Paris as cities at risk. And a study by the global accounting firm Deloitte & Touche cautioned that average house prices “will exceed pre-crisis levels” if the European Central Bank keeps interest rates at zero, as planned.

Housing prices have risen sharply in the United States as well. But there, the boom has been driven by individual buyers, household debt has been held in check and lending standards have remained relatively tight — all factors that reduce the chance of another collapse. Moreover, while benchmark interest rates in the United States have been kept low, they were never negative — and have now been above zero for several years.

Some economists say that the concerns in Europe are overblown and that prices are overvalued but not in a danger zone. For one thing, job creation from the economic recovery, however tepid or uneven, has expanded the ranks of creditworthy borrowers. And buyers are mainly living in properties or renting them out, rather than flipping them as happened before the crisis.

The supply of urban housing, however, has failed to keep pace with the resulting demand. Disrupters like Airbnb have added to the crunch by converting residential properties into vacation stays. The result is a shortage of affordable housing, particularly in the rental sector, squeezing middle and low-income earners such as teachers, firefighters, nurses and retail employees who work in cities but cannot afford to live in them.

The dynamics are worsening as deep-pocketed domestic and foreign investors pivot from focusing almost exclusively on commercial real estate to acquiring residential housing around Europe. Pension and insurance funds, which typically invest in government bonds, have found it impossible to make money off countries like Germany, where the interest rate paid is less than zero. That has driven them into real estate funds, which offer high returns in comparison to bonds.

Rents and mortgages consume a quarter of monthly income on average, up from 17 percent two decades ago, according to data compiled by Housing Europe, a federation of affordable-housing groups. One-tenth of Europeans spend over 40 percent of their income on housing. The rates are sharply higher for the poorest households.

“House prices have risen much faster than citizens’ incomes,” said Cédric Van Styvendael, the organization’s president. “It’s a problem for Europe.” Wages and salaries in the eurozone grew 2.7 percent in the three months to June in 2019 compared to a year earlier.

The scarcity of affordable housing is fueling resentment and political strife. In Madrid and Barcelona, home prices have jumped more than 30 percent since 2016, pushing rents up as landlords sought bigger returns. Prime Minister Pedro Sánchez capped rents in Spain this summer at the rate of inflation, now 0.4 percent, limiting income for property owners.

In Paris, where 70 percent of residents are renters, Mayor Anne Hidalgo imposed new rent controls. While rents are limited by strict housing regulations, they have risen 40 percent between 2000 and 2018. As property prices keep climbing — they recently broke a record of 10,000 euros on average per square meter, or about $1,000 per square foot, one of the highest prices in Europe — Ms. Hidalgo is taking other steps to prevent the city from becoming a “ghetto for the rich.” Her plans include building subsidized housing that families with modest incomes can purchase at half the market rate.

Few places have felt the impact as sharply as Berlin. Since the fall of the Berlin Wall 30 years ago, workers, artists and students have increasingly been displaced by an influx of young professionals with families. But property prices and rents have skyrocketed in recent years as home buyers and investors double down.

The city imposed a five-year rent freeze, the toughest in Europe, in the summer after rents jumped more than 50 percent in five years, and gave tenants the right to demand reductions if rents go too high. German real estate stocks have slumped since the ruling.

For Kathrin Hauer, 39, the measures are urgent. She was a student nearly two decades ago when she became a tenant in a World War II-era building formerly owned by the East German government, on Schönhauser Allee, a central street. Ms. Hauer, who works as a costume and set designer for German theaters, was long happy with her $450-a-month apartment, which was bought by a small group of investors after Communism.

Then in 2016, the building was sold to an investment company. Last December, right before a national law limiting rent increases was to take effect, the company announced major construction work that would raise rents on the low-income tenants by 250 percent. Ms. Hauer’s rent would surge above $1,500 a month, far more than she could afford.

“This is meant to scare us to get out,” Ms. Hauer said.

The tenants won an order from the city’s planning department to halt the renovations, which included large elevators, balconies and floor-to-ceiling windows. Soon after, in a move that tenants believe was a form of retaliation, Ms. Hauer said, the investors ordered all the trees in the interior courtyard to be razed, and hired a middleman to persuade tenants to agree to the renovations and accept buyouts.

Itai Amir, the director of the company that now owns the building, would not comment for this article.

Wibke Werner, the deputy director of Berliner Mieterverein, an association of Berlin renters with more 170,000 members, said that because of the low interest rates, investors were “betting on concrete gold.”

“These investments are designed to optimize returns,” she said, “which means rising rents and the crowding out of low-income households.”

In Denmark, which is not part of the euro but closely tracks E.C.B. monetary policy, benchmark interest rates have been negative for seven years. Seeking greater returns, some Danish pension funds are buying large holdings of prime real estate and new buildings to offer for rent. But rents have grown so high that the city is considering capping them, which could cut into those investments.

At the same time, rates are so low that bargains being offered by banks are hard to pass up. In August, Jyske Bank of Denmark began offering 10-year fixed-rate mortgages at negative 0.5 percent interest before fees, meaning the amount outstanding on the loan will be reduced each month by more than the borrower has paid. Nordea Bank is offering 20-year loans at zero interest.

While banks have stopped flooding mailboxes with credit card offers, a common practice before the debt crisis, offering ultracheap mortgage loans is a way of luring new customers.

That has tempted borrowers in the Netherlands to go to extremes. While Dutch banks took steps to curb lending this year, Dutch households held mortgage debt of 527 billion euros ($584 billion) at the end of March — equal to nearly two-thirds of the Dutch economy.

The Dutch central bank warned recently that “systemic risk” in the Dutch housing market posed the biggest threat to financial stability. A sudden fall in housing prices could be disastrous for households and banks, it said, because borrowers are overextended.

With little room to maneuver, the European Central Bank recently called on politicians in euro countries to take bolder steps to prevent asset bubbles from growing.

“This is all new territory,” Mr. Holzhey of UBS said. “Some caution is warranted because in the past, no one really forecast a house price crash,” he said.

“Headlines always said prices are rising, but there’s no bubble,” he added.

Until there was.

Christopher Schuetze contributed reporting from Berlin, Jack Ewing from Frankfurt and Ben Casselman from New York. Alain Delaquérière contributed research.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Felix G. Rohatyn, Financier Who Piloted New York’s Rescue, Dies at 91

Westlake Legal Group rohatyn-obit-facebookJumbo-v2 Felix G. Rohatyn, Financier Who Piloted New York’s Rescue, Dies at 91 Rohatyn, Felix G Lazard LLC Banking and Financial Institutions

Felix G. Rohatyn, a former child refugee from Nazi-occupied France who became a pillar of Wall Street and a trusted government adviser who engineered the rescue of a beleaguered New York City from insolvency in the 1970s, died on Saturday at his home in Manhattan. He was 91.

His death was confirmed by his son Nicolas Rohatyn.

Mr. Rohatyn’s journey from war-ravaged Europe to the pinnacle of the illustrious investment house Lazard was a quintessential tale of immigrant success. As one of the world’s pre-eminent financiers, he brokered numerous mergers and acquisitions, leaving his stamp on Avis, Lockheed Martin, Warner Bros., General Electric and other corporations. He counseled innumerable business leaders and politicians.

For nearly two decades, from 1975 to 1993, as chairman of the state-appointed Municipal Assistance Corporation, Mr. Rohatyn had a say, often the final one, over taxes and spending in the nation’s largest city, a degree of influence for an unelected official that rankled some critics.

His efforts to meld private profit with the public good defined him: In the perception of many his name was synonymous with two institutions — the M.A.C., which was hastily created in 1975 to save the city from insolvency, and Lazard (formerly Lazard Frères), the storied investment firm that started as a dry-goods business in New Orleans in 1848.

What distinguished him in both domains were his deft negotiating skills, his access to power and his understanding of it, his management of public perception (and of the journalists who shape it), and his adeptness not only with numbers but also with words. He had a genius for finding solutions that satisfied both political and economic imperatives.

Indeed, Mr. Rohatyn (pronounced ROE-ah-tin) was given the nickname Felix the Fixer (one not always used as a compliment). But he likened his work to that of a surgeon. “I get called when something is broken,” he explained to The Associated Press in 1978. “I’m supposed to operate, fix it up and leave as little blood on the floor as possible.”

Though he reached the heights of success and power on Wall Street, some of his loftiest ambitions were frustrated. President Bill Clinton considered Mr. Rohatyn, a longtime Democratic donor, for Treasury secretary but passed him over, and a Republican-controlled Senate later scuttled a plan to name him vice chairman of the Federal Reserve. Mr. Clinton named him ambassador to France, the country to which he had fled from his native Austria, as something of a consolation prize.

After returning from four years in Paris at the end of 2000, Mr. Rohatyn, a compact man of sober, occasionally stern rectitude, settled into the role of wise eminence. He began writing, often for The New York Review of Books. He denounced the foreign and fiscal policies of President George W. Bush; published a book warning that an aging infrastructure would soon be a national crisis; rejoined Lazard as a senior adviser after the death of Bruce Wasserstein, its chief executive; and wrote a memoir, partly in response to the global financial crisis of 2008.

Brimming with nostalgia for a bygone Wall Street, in which relationships and reputation mattered, and dripping with disdain for its newer incarnation, driven by quantitative models and short-term profits — “an electronic game,” as he put it — the memoir concluded with an admonition:

“Investment banking is not a business; it is a personal service where bankers work hand in hand with their clients. And it is a service that must not simply be about making bigger and bigger deals that reap rewards for only a small group of executives.”

Mr. Rohatyn’s knack for cultivating and capitalizing on relationships — and for fixing — was in greatest evidence in the spring of 1975, when Wall Street refused to extend New York City additional short-term credit. For more than 10 years, a period of sluggish economic growth, the municipal work force and budget had grown even as the city’s population and tax base shrank. To cover mounting deficits, the city had relied on short-term financing — a practice originally intended to make up for normal, seasonal cash shortfalls. This led only to steadily higher debt-service payments.

Worse yet, the city had turned to management and accounting gimmicks, like transferring salaries and other operating expenses to its capital budget, which was supposed to be used for long-term infrastructure projects, not day-to-day operating expenses. (Spending on infrastructure had declined to the point where streets and bridges lacked even basic minimum maintenance.)

For a time the city had gotten by on these methods — until the banks, ever more afraid that they would never be repaid, decided that they had had enough. They summarily closed off the city’s access to credit, refusing to market the short-term notes that the city needed to cover its expenses and pay off maturing notes.

Just before Memorial Day, at the suggestion of the longtime Democratic kingmaker Robert S. Strauss, Mr. Rohatyn was summoned from Lazard to the Midtown Manhattan offices of Gov. Hugh L. Carey. A crash was imminent, he was told. The shortfall was $3 billion: $900 million was due in June, and two installments of $1 billion each were due in July and August.

Mr. Carey named Mr. Rohatyn and three others to an advisory panel, which quickly determined that the city needed a financing vehicle that would be a creature of the state, not the city. It would be assured of revenues and have the political credibility to turn to Wall Street for cash. It would be governed by a nine-member board, with only four of the seats filled at the recommendation of the mayor, Abraham D. Beame. And it would have first call on city sales taxes and stock-transfer taxes, giving it the power to turn them into state revenues and thus shelter them from creditors in the event of a city bankruptcy.

Meanwhile, the news kept getting worse. The city disclosed that it had $2.5 billion more in short-term housing notes coming due. It later emerged that the city’s annual deficit had risen to $1.5 billion a year — about three times the official estimate — on a budget of around $12 billion.

Mr. Rohatyn brokered a $900 million emergency plan to stave off a bankruptcy projected for June 18. It included a $100 million loan from banks; an agreement by the banks to extend for another year $280 million in notes coming due immediately; and a $200 million advance by the state against further education payments.

Over raucous objections by municipal unions, Mr. Carey signed the legislation, setting up what became popularly known as “Big MAC” on June 10. By then the city was living hand-to-mouth. Mr. Rohatyn helped orchestrate a combination of bank loans and loan extensions, bond sales, wage deferrals, union investments and advance payments in state aid to get the city through July and August. But the market for M.A.C. bonds shriveled. Default loomed once again.

“It was like climbing sand dunes — a grueling and ultimately futile exercise,” Mr. Rohatyn later recalled. “Something had to change.”

That something was the city’s control over its affairs. At Mr. Rohatyn’s direction, Albany set up the Emergency Financial Control Board, with Mr. Rohatyn as a member. It would set the amount of revenues available to the city, control all borrowing and labor contracts, and ensure that the city stuck to its fiscal plan each quarter.

The unions agreed to cut the city’s payroll by 50,000 workers, on top of the 14,000 layoffs already announced — a total reduction of some 20 percent. The M.A.C., with Mr. Rohatyn now installed as chairman, devised what ended up being a $6.6 billion rescue package. It included a three-year “moratorium” on repayment of short-term notes, hefty investment from union pension funds, and federal loan guarantees.

President Gerald R. Ford, who had portrayed New York, not inaccurately, as an emblem of mismanagement, refused to go along with the loan guarantees, saying that a municipal bankruptcy would be temporary and tolerable. The Daily News trumpeted that veto threat with the memorably economical headline “Ford to City: Drop Dead.”

Only after the Fed’s chairman, Arthur F. Burns, returned from a meeting with European leaders and warned Mr. Ford of the threat to global financial markets did the White House agree to the loan guarantees.

Mr. Rohatyn was hailed for standing up to Mayor Beame and for his ability to reach agreement with bankers and union leaders alike. But the turmoil — a strike by sanitation workers, a wave of police layoffs, increases in transit fares, the imposition of tuition fees for the first time at the City University of New York and, above all, the loss of city autonomy, however temporary — redounded for decades.

The crisis did not abate until 1978, when Mr. Rohatyn devised a four-year financing package, which exchanged short-term high-interest loans for equivalent amounts of lower-interest M.A.C. bonds. Under a new mayor, Edward I. Koch, the city balanced its budget in 1980. It re-entered the municipal bond market in 1981, and by 1985 the M.A.C. had stopped selling new bonds; the final M.A.C. bonds were not paid off until 2008.

Investors who bought the bonds made healthy returns, and, starting in 1983, the M.A.C. threw off healthy surpluses, which Mr. Rohatyn used tactically to guide policy from behind the scenes. Calmly pointing out to mayors and union leaders that he thought they were spending money unwisely, he made their receipt of the surplus funds conditional on their cutting expenses. He also used the surpluses to set aside billions for schools, transit, low- and middle-income housing, and the hiring of police officers in response to the crack cocaine epidemic.

It was an unprecedented exercise of private power at City Hall, and it prompted Mr. Koch, both a friend and a foe, to ask, “Who elected Felix mayor?”

Mr. Rohatyn was so stung by attacks from organized labor that in 1990, during another, less severe downturn in the city’s fortunes, he announced his resignation. Wall Street shuddered, and Gov. Mario M. Cuomo persuaded him to stay on for three more years.

Like the city he helped save, Mr. Rohatyn’s early life was a mixture of luxury and hardship. Born in Vienna on May 29, 1928, Felix George Rohatyn was the only son of Alexander Rohatyn, a Polish Jew, and the former Edith Knoll, the daughter of a prosperous Viennese banker. Alexander managed his father-in-law’s breweries in Austria, Romania and Yugoslavia until 1934, when the rising Nazi menace prompted the family to uproot itself to France.

Mr. Rohatyn’s parents were divorced a few years later. His mother remarried, and in 1942, with France under Vichy control, she decided to flee once again.

Mr. Rohatyn would recall that their escape was nearly disrupted at a German checkpoint: The soldier posted there, momentarily distracted when he reached into his pocket for a cigarette, waved their car forward but stopped the following one.

They had taken little with them. His mother had directed her son to empty toothpaste tubes and fill them with dozens of gold coins; their Polish cook had helped them tie mattresses to the top of their car.

“We had been well off, but that was all we got out,” Mr. Rohatyn wrote. “Ever since, I’ve had the feeling that the only permanent wealth is what you carry around in your head.”

Reunited with Felix’s stepfather, who had escaped from a Nazi internment camp in Brittany, Edith traveled to the United States by way of Casablanca, Morocco; Lisbon; and Rio de Janeiro. (They were aided by Brazil’s ambassador to France, Luis Martins de Souza Dantas, who helped some 400 Jews, including Felix, reach safety.)

Resettled in Manhattan, Felix attended McBurney School, where he perfected his English, and then Middlebury College in Vermont, where he majored in physics.

While in college, Felix returned to France to get reacquainted with his father and try his hand at the brewery; for six months he cleaned out fermentation vats, worked in a bottling plant and loaded trucks. (On his way back to the United States, he met the singer Édith Piaf; after he graduated, in 1949, he tutored her in English, for $5 an hour, in a Park Avenue apartment she shared with other nightclub singers.)

It was through a friend of his stepfather’s that Mr. Rohatyn met André Meyer, a mercurial French financier who controlled Lazard. Mr. Meyer would become his mentor and guide. After a training period in Europe, Mr. Rohatyn devoted himself to the practice of buying securities in one currency and selling them in another. He left Lazard after the Army drafted him in 1950; he was an infantry sergeant in Germany. Discharged in 1953, he rejoined Lazard two years later.

He would stay there for the next 40 years, becoming a partner in 1960. Encouraged to move into corporate finance and mergers on the advice of Samuel Bronfman, who acquired Seagram, the Canadian distiller, Mr. Rohatyn became so adept at deal-making that Mr. Meyer would later say of him, “He is better than the teacher.”

Mr. Rohatyn compared deal-making to a puzzle that required “not simply diligence and strategy but at times an iron will.” He brokered the acquisition of Avis, the rental car company, for about $5 million; Lazard turned the company around and quadrupled its investment in five years. He helped Steve Ross gain control of the Warner Bros. film studio — now part of AT&T. He engineered the merger of the Loews Corporation with the Lorillard tobacco fortune.

Mr. Rohatyn’s penchant for deal-making could attract controversy. In the 1960s, he helped the ITT Corporation, which had started as a telephone concern, assemble one of the first modern corporate conglomerates, starting with the $420 million purchase of Jennings Radio, a small high-tech company in Silicon Valley.

ITT’s growth prompted an antitrust investigation by the Justice Department. It was settled, but then a leaked memo from an ITT lobbyist suggested that the company had offered $400,000 in contributions to the 1972 Republican National Convention in return for the Nixon administration’s agreeing to settle the case. (ITT denied the accusations, which were never proved.)

There were also allegations that ITT had tried unsuccessfully in 1970 to block the election of Salvador Allende Gossens as president of Chile. A Marxist, Mr. Allende nationalized an ITT subsidiary; in 1973, he was overthrown by the military and killed.

ITT’s chief executive, Harold S. Geneen, maintained that the company’s $350,000 payment for “supporting the democratic, anti‐Communist cause” in Chile had been legal and that it had not been used to support violence, but Mr. Rohatyn’s reputation for probity suffered. On the advice of his friend Katharine Graham, the publisher of The Washington Post, he resigned from ITT’s board. In the meantime, he had faced withering questioning while testifying before Congress and endured negative coverage in the news media, notably by the investigative columnist Jack Anderson.

Mr. Rohatyn later described his shepherding New York City toward financial stability as a way to make up for the ITT embarrassment.

He had earlier gained crisis-management experience as a member of the board of governors of the New York Stock Exchange. In 1970, after a string of corporate failures, the old-line investment house McDonnell went under, and Wall Street seized up. The exchange’s chairman, Bernard J. Lasker, asked Mr. Rohatyn to lead a “crisis committee.”

The panel, among other things, revised the exchange’s archaic capital rules. Banks were supposed to have a ratio of debt to capital no higher than 20 to 1, but the definition of capital was vague and overly broad. Mr. Rohatyn helped arrange the rescues of the banks Hayden Stone (by a group of Oklahoma investors) and Goodbody (by Merrill Lynch, with the exchange providing indemnifications for potential liabilities).

By the mid-1970s, when Mr. Rohatyn was most in the headlines, the world of gentlemen’s agreements he had mastered had begun to give way. The unwritten ban on hostile takeovers was upended when Morgan Stanley made an uninvited bid for the battery manufacturer International Nickel.

In the 1980s, corporate raiders like Michael Milken exploited the use of so-called junk bonds to achieve the leverage to take over and break up much larger companies. Traders like Ivan Boesky mastered the strategy of “risk arbitrage,” now commonly used by hedge funds, to bet on corporate takeovers. (Both men went to prison for securities violations.)

Even Lazard, one of the most lucrative of the old-shoe firms, felt the ground shifting. Mr. Rohatyn wrote:

“In time the profitable, low-risk, non-capital-intensive advisory business of the firm would be subsidizing the high-risk, capital-intensive trading activities. And this discrepancy in our internal balance sheet would lead to tension within the firm.”

The tension was no doubt one reason Mr. Rohatyn rebuffed pleas by his mentor, Mr. Meyer, to take over Lazard. Mr. Rohatyn, who wanted to maintain his role in public life, instead advised Mr. Meyer to name as his successor Michel David-Weill. Mr. Weill would eventually reunite the three branches of Lazard, in New York, London and Paris.

Mr. Rohatyn remained the company’s leading rainmaker. Lazard represented RJR Nabisco when it was acquired in 1989 by the private equity firm KKR for $25 billion — the largest leveraged buyout to that point. The next year, he helped broker the merger of the entertainment giant MCA with Matsushita, the Japanese electrical concern (which was itself later sold to Seagram). He worked on the merger of Warner Communications with Time Inc.; the purchase of The Limited, the clothing retailer, by the company that operated Bergdorf Goodman and Neiman Marcus; and the acquisition by Viacom of Paramount Communications.

Mr. Rohatyn liked to quote Mr. Meyer: “Public service is like having a young mistress. You should be careful. It’s tempting.” His political acumen, however, did not quite match his financial and managerial skill.

Mr. Rohatyn backed Edmund S. Muskie in 1972 and Henry M. Jackson in 1976 for the Democratic presidential nomination. He upbraided President Jimmy Carter for not delivering more aid to the city. He urged Mr. Cuomo to seek the Democratic presidential nomination in 1992; after the governor declined, he backed the independent presidential candidacy of the businessman H. Ross Perot. In the 1970s, Mr. Perot had taken over a troubled investment house in a deal that Mr. Rohatyn helped arrange.

That support for Mr. Perot — who lost to Mr. Clinton — probably helped dash Mr. Rohatyn’s highest aspirations, to become Treasury secretary. After the Senate blocked his appointment to the Fed, Mr. Rohatyn even had to fight to succeed Pamela Harriman as ambassador to France. (The position had been dangled before Frank Wisner, a career diplomat who had helped found the C.I.A., and Mr. Clinton’s chief of staff, Erskine B. Bowles, had tried to persuade Mr. Rohatyn to go to Tokyo instead.)

Mr. Rohatyn’s years in France were largely uneventful; he fostered a friendship with President François Mitterrand, promoted museum exchanges and helped create the French-American Business Council.

Mr. Rohatyn married Jeannette Streit in 1956, and they had three sons, Pierre, Nicolas and Michael. The marriage ended in divorce; she died in 2012. In 1979 he married the former Elizabeth Fly, whose two earlier marriages had ended in divorce. Ms. Rohatyn, a longtime supporter of education and the arts, died in October 2016.

In 2009, at 80, he turned his attention to the nation’s aging infrastructure, warning in a book, “Bold Endeavors: How Our Government Built America, and Why It Must Rebuild Now,” that only major investments in public works could avert an even more costly crisis later on.

The next year he published his memoir, “Dealings: A Political and Financial Life.” And in 2012, following Hurricane Sandy, Gov. Andrew M. Cuomo named him co-chairman of a commission entrusted with finding ways to improve the resilience of the state’s infrastructure in the face of natural disasters and other emergencies.

In 2016, Mr. Rohatyn and his wife, a former chairwoman of the New York Public Library, announced that they had given the New-York Historical Society a collection of his letters, documents and other papers related to the New York City fiscal crisis and his business career.

A fixture in philanthropic circles — an annual Easter egg hunt on the lawn of his Southampton home on Long Island was a high point on the city’s social calendar — Mr. Rohatyn professed ambivalence about high society, frequently reminding his fellow wealthy that their social obligations meant more than attending gala events.

Mr. Rohatyn often said that the legacy of the fiscal crisis should be “balanced-budget liberalism”; he advocated a modern-day version of the Reconstruction Finance Corporation, President Franklin D. Roosevelt’s Depression-era lending entity, to help rebuild cities.

He deplored the layoffs and instability set off by some of the very corporate marriages he had arranged, and called for a new partnership between business and labor. As early as 1982, in a commencement address at his alma mater, Middlebury, Mr. Rohatyn warned: “Maybe for the first time in history, the United States is faced with doubts about its destiny. In less than 25 years, we have gone from the American Century to the American crisis.”

In a 2007 history of Lazard, William D. Cohan, the closest Mr. Rohatyn had to a biographer, wrote: “For much of the Reagan era, Felix predicted the decline and fall of American society at the very moment American economic and political power was reaching its zenith worldwide.”

But by 2010, with the economy in its worst rut and inequality rising toward its highest level since the Depression, what once seemed preachy now looked prophetic.

“The basic test of a functioning democracy is its ability to create new wealth and see to its fair distribution,” Mr. Rohatyn said in 1982. “When a democratic society does not meet the test of fairness — when, as in the present state, no attempt seems to be made at fairness — freedom is in jeopardy.”

Mariel Padilla contributed reporting.

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