Friday, November 23, 2012

Mets Financial Fiasco:The Need to Change City Subsidy Policies

The NY Times is reporting that the NY Mets-last seen messily extricating themselves from the Bernie Madoff mess-has stepped in it once again with Steven Cohen, the hedge fund billionaire the Wilpons turned to when they became cash poor. Cohen, the Mets' white knight, is appreantly far from 99% pure:

"It was, even then, a risk perhaps not worth taking. The owners of the Mets, fresh off the humbling and costly financial entanglement with a family friend, Bernard L. Madoff, sold a minority stake in the team to another secretive hedge fund manager and family friend whose operation was in the cross hairs of determined federal prosecutors.
But the owners, Fred Wilpon and Saul Katz, went ahead and sold a 4 percent share earlier this year to Steven A. Cohen, the owner of SAC Capital Advisors, who has seen at least seven of his former employees implicated in the federal government’s multiyear insider trading investigation. Three have pleaded guilty to insider trading while working for Cohen."

Oh boy! These are the folks that the city wants to hand over $200 million worth of tax payer bought property? What does it take to get the Bloomberg administration to exercise a bit of restraint when it decides who to hand out unearned subsidies?

The Times speculates what might happen if Cohen is eventually charged-since the feds seem to have him in their cross hairs:

"If prosecutors eventually make a case against Cohen, which many in the city’s financial and legal circles believe they are intent on doing, it will be another whopping embarrassment for the Mets so soon after suffering huge losses because of their trust in Madoff and what turned out to be his Ponzi scheme.
If Cohen is charged, Commissioner Bud Selig could suspend him or compel the Mets to buy out his ownership share. Unless the Mets have another buyer ready in the wings, they would have to find $20 million to repay his investment, which could be a big burden for a club that went to Cohen and others precisely to raise desperately needed cash."

The Mets are a failing enterprise that the city has decided to bail out with its development award at Willets Point. Sound familiar? Is this any different from the city and state's decision to hand over $127 million to FreshDirect? Could the online grocer be in as shaky a financial position as the Mets are? Some people believe that it is-and that the humongous cash outlay from the government is its lifeline to solvency.

This is precisely why the city's economic subsidy policies need to be changed. Under this mayor, crony capitalism has ruled the day-with little due diligence surrounding the decisions, and no concern about the collateral damages caused by these outrageous outlays.