The crisis that wiped out the venerable Lehman Brothers and left two others financial giants struggling for life threatens to cascade across all sectors of city life, from the restaurant business to the pace of rebuilding at the World Trade Center, observers say.
The city is reeling from one of the most historic days in financial
history, which ended with the Dow down more than 500 points following
once unthinkable developments: The mighty Merrill Lynch agreed to be
acquired by Bank of America for $50 billion and insurance giant AIG
desperately grabbed onto a $20 billion lifeline thrown by the governor.
Mayor Michael Bloomberg canceled a planned trip to California and held
a hastily scheduled news conference with City Comptroller William C.
Thompson and Council Speaker Christine Quinn. Bloomberg urged New
Yorkers to remain resolute in the face of what some see as an
"We shouldn't kid ourselves and think that there are not going to be
very difficult decisions ahead. There will be," the mayor said. "At the
same time, the vital signs of the city's economy remain strong a lot
stronger than in much of the rest of the nation. New Yorkers have
gotten through the ups and downs of Wall Street before, and we will get
through this one too."
Many New Yorkers though weren't so sure.
"It makes things look pretty weak," said Madonna Hernandez, 23, of
Brooklyn. "I just graduated and it's been a real struggle to get my
foot in the door anywhere. It's tough out there."
And it could get tougher, as the problems of Wall Street spread to Main Street.
The housing market
The continued march of bankers with boxes -- not into new homes but
out on the street looking for jobs -- will certainly soften the city's
real estate market.
"I am a lot more worried about '09 than I am about '08," said Jonathan
Miller, of Miller Samuel Inc, a real estate consulting firm. Starting
next year he predicts more homes will be on the market, sales will slow
down and eventually you may see prices on apartment fall, he said.
Fewer people buying homes means more renters will be competing for
apartments, according to Pamela Liebman, chief executive of the
For buyers, banks will be less willing to lend money and co-op boards will set even tougher standards, she said.
For sellers, Liebman recommends they start bringing down prices: "It's a wake-up call. They can't keep chasing the market up."
Commercial Real Estate
The fall of Lehman Brothers will also take its toll on commercial real
estate, with oversupply possibly bringing prices down.
Its employees have been clearing out of its million-square-foot building in
Times Square, which the company owns, and it leases space around the city.
About 2.4 million square feet of empty
space could be left by Lehman's 12,000 departing employees.
And that's not to mention possible office consolidations from the
merger of Merrill Lynch with Bank of America, set against the general
downsizing throughout the financial industry.
Restaurants and entertainment