Question

Write a short summary of any related impacts of a Crisis on both a small business and a large business (or Industry) in New York and/or New Jersey. In your own words please don't copy and paste.

Answer 1

Today’s economic and fiscal crises are best understood in historical context. Those who are old enough to remember the 1970’s will recall how the city came close to bankruptcy, losing half its Fortune 500 headquarters and much of its middle class to suburbia. During that decade, Central Harlem lost 40% of its population and as many as 15,000 apartments a year to fire or abandonment. By the 1980’s, two-thirds of the real estate in Central Harlem was in city ownership as a result of tax foreclosure and condemnation. Crime was high, drugs were rampant and the subways were falling apart. Urban America - the so-called inner cities of our country - was largely written off.

The city’s private sector has lost about 100,000 jobs in the past year. The biggest losses are in financial and professional services, media and advertising, retail and entertainment, travel and tourism. All are key contributors to the economy of the city and to Harlem. The only job growth has been in health and education - sectors which depend on increasingly scarce public dollars.

New York has been hardest hit in financial services. In less than a year, many of our biggest employers and taxpayers were lost or severely damaged in the financial crisis - Bear Stearns, AIG, Lehman Brothers, Merrill Lynch, Citi, Wachovia, Washington Mutual. Those that survived did so because the federal government came in with huge investments and provided protection against a run on the banks. As a condition of providing rescue funds, federal bank regulators increased the requirements for bank capital - in other words, no more making loans that exceed bank reserves by 20 or 30 times. The consequences of federal restraints and a failing economy is the credit crunch, in which banks have to hang on to their cash and loans are unavailable to consumers and small business. This makes economic recovery all the more difficult. The government is now working on a variety of programs to get credit flowing again, and banks certainly want to be in the lending business for their own survival, but the balance is not easy and it will take time.

Real Estate is the other big loser. The Class A office vacancy rate in midtown is over 12%, the highest in 12 years and almost double where it was just one year ago. Residential sales in the city have fallen 50% in the past year. Construction has come to a grinding halt. And there are more problems to come. The Partnership has been looking at the situation of multifamily apartment buildings that were acquired during the housing boom but are no longer worth what their owners paid for them and are going into receivership or foreclosure. It is estimated that there are at least 70,000 apartments in this situation in the city that present a serious threat to tenants and neighborhoods across the five boroughs.

Most experts say that we are at the bottom — that unemployment will continue to rise for the next few months, probably going from the current 9.5 % in New York City to just over 10 %. Unemployment rates in Harlem are typically double the city’s average. The official numbers have reached 18.7 percent in Community Districts 9 and 10 and 17.1 percent in District 11 in 2008, but the real numbers of people out of work in this community are much higher.

New York and Harlem are in far better shape to deal with these problems than we were thirty years ago. The federal government has stepped up quickly to help. Many banking institutions that agreed to take federal funds to prevent a collapse of the financial system are profitable again. Goldman Sachs, BONY Mellon, JP Morgan Chase, Morgan Stanley and American Express are institutions that have fully repaid their federal TARP money with a profit for the taxpayers and have returned to profitability. Community and regional banks, like Carver and Capital One North Fork, are doing well as individuals increase their savings and keep their bank relationships close to home.

The Governor and Mayor are undertaking a number of initiatives to make sure New York City and State come out of this recession with a stronger and more diversified economy. An important component for Harlem is the focus on small and neighborhood-based businesses. Just this week, the Mayor announced a kitchen incubator opening in Harlem to provide facilities for aspiring food preparation companies. This follows similar projects announced by the city Economic Development Corporation to encourage start up companies and small entrepreneurs in financial services, media and technology. It has been clearly recognized that big corporations and real estate development are not the most promising source of new jobs and that New York needs to shift its focus to entrepreneurial ventures.