Cover Story	M&T Boss Wilmers Named New York State Economic Czar by John McMahon

Shocking developments

Last week New York Governor David Paterson, a liberal Democrat, named Robert G. Wilmers, chairman of M&T Bank and prominent anti-union activist, as his pick to run the Empire State Development Corporation (ESDC), the state’s main economic development arm.

Robert G. Wilmers

Wilmers’ supporters are, of course, elated. Unshackle Upstate, a business lobbying group founded by Wilmers, issued this statement about the appointment: “Wilmers, a passionate advocate for Upstate and the New York business community as a whole, has the expertise and experience to change, for the better, the path of economic development in New York State.”

While Wilmers has enjoyed tremendous success at M&T Bank, he is just as well known for his fierce opposition to organized labor. Why would Governor Paterson risk alienating his progressive constituency by letting Wilmers, the fox, into the henhouse?

The “co-Empire” red herring

Former Governor Eliot Spitzer split ESDC into co-equal upstate and downstate offices, but the plan was doomed. Since New York City is the economic engine for the state, its development has historically taken priority over upstate. However, the failure of the Spitzer plan may be something of a red herring given the current economic climate and the state’s inability to fund many of the projects on ESDC’s docket.

A New York Times article last month outlined numerous stalled development projects in New York City and stated that “…the governor has sent conflicting messages, preaching fiscal austerity while suggesting that the state can move forward on a host of costly projects, including the Second Avenue subway, the extension of the No. 7 line, the $14 billion redevelopment of the West Side railyards, the $14 billion Penn Station project and the $4 billion Atlantic Yards basketball arena and residential complex in Brooklyn.” The article goes on to describe growing friction between New York City Mayor Michael Bloomberg and the governor over the direction of the agency.

So why did Paterson do it? The Wilmers appointment comes on the heels of the governor’s controversial (and seemingly ill-fated) plan to put a cap on the amount of taxes a school district can impose. Is Governor Paterson veering to the right or is he just punting?

While union members might see the Wilmers appointment and the tax cap as a sellout by Governor Paterson, it may be a moot point given ESDC’s current financial woes. If Wilmers starts giving priority to upstate, how will downstate Republicans like Bloomberg react?

In the 24/7, permanent campaign culture of American politics there are no leaders, only candidates. In this light the Wilmers appointment starts to make sense. Let’s not forget—the popular billionaire mayor of New York City would make a formidable opponent for Paterson in 2010.

The New York Sun recently broke the news that Bloomberg has already hired pollsters. he cannot retain his seat as nayor due to term limits. With a Bloomberg gubernatorial candidacy on the horizon, Albany may be morphing from a triumvirate into a tetrarchy. In light of this, the dysfunctional Spitzer “co-equal” experiment doesn’t seem to be the true rationale for Paterson’s appointment of Wilmers.

It may be that Paterson has turned the keys over to Wilmers for the sake of his own political survival, or he may be doing it to get Wilmers out of his hair, as he has said. If the appointment pits upstate and downstate Republicans against each other for the scant resources at the disposal of ESDC, Paterson will have achieved three objectives with the appointment. The stakes are fairly high, though, as the rumors of recent tension between Paterson and Assembly leader Sheldon Silver reported by the New York Post would indicate.

The “voluntary” chairman

Following the current vogue in Republican public relations tactics, Wilmers will serve as chair of ESDC on a “voluntary” basis. Like Erie County Executive Chris Collins’ pledge to not accept his salary until the Erie County Control Board disbands, the “volunteer” label seems to elevate Wilmers above the fray. While volunteering for public office and returning your paycheck might appear to be noble and altruistic public acts, more often that not only the well-off can afford to work without pay.

Wilmers is volunteering to take a position that has great influence over dispensing public wealth, and judging from his track record in Buffalo that will mean rewarding friends and punishing enemies. Volunteering to dispense tax breaks and government subsidies is kind of like a single college guy “volunteering” to serve drinks at a sorority charity event. The guy probably does care about cancer or whatever, but if his selfless act of philanthropy is rewarded with a few phone numbers, all the better, right?

ESDC has been criticized for doling out corporate welfare in the guise of economic development for decades. In many cases, companies that accept tax credits or other subsidies have failed to live up to job creation commitments. Earlier this year 26 companies were de-certified by the ESDC, including five companies in the Buffalo area, for failing to deliver on promises made in exchange for public dollars.

According to an article earlier this year in the Buffalo News, “The state is working from a list of some 2,900 businesses across New York identified as missing investment and job creation goals by at least 60 percent, as of Dec. 31, 2006. That list, released in July 2007, turned heads locally because it included such high-profile entities as M&T Bank, Delaware North Cos. and the Buffalo Sabres. Many of the named companies disputed the accuracy of the July list, saying it contained wrong or outdated information regarding benefit applications.”

M&T’s appearance on that list was written off as a paperwork issue, but it raises questions about Wilmers’ status as the voluntary chairman of an aid organization from which his company has received subsidies.

Furthermore, M&T has not been immune from the subprime mortgage carnage. The bank reported that profits for the fourth quarter were down 69 percent as it made moves to brace itself for more loan losses. While the Buffalo News opined that the damage was not as severe at M&T as it has been at, say, Citigroup, it does complicate the ethics of the Wilmers appointment. Will his loyalties be to ESDC or to his bank and its preferred customers?

These ethical concerns were swept aside in a recent editorial by the Buffalo News. “As the unpaid chairman of the ESDC, who will retain his titles of chairman and chief executive officer of M&T Bank, Wilmers is likely to leave the nuts and bolts of economic development support to a pyramid of officials who will include a day-to-day CEO and two executives — one for upstate, one for New York City and its environs — whose job it will be to promote business development.”

According to this logic, since Wilmers will assume a somewhat pharaonic title, he will have little to do with the “nuts and bolts” of who receives aid and who does not. In other words, just trust him.

The Empire and anti-union activism

Robert Moses was the historical model of the “Empire builder,” and ESDC is a product of his imagination. Even though Moses was a Republican, he came to power as an advisor to “the happy warrior,” Al Smith, the Democratic governor of New York in the 1920s. Moses understood the importance of appearing to be above politics. As a champion for public parks and not a politician, he maintained the goodwill and admiration of New Yorkers, even after public relations disasters in the 1950s and 1960s.

More importantly, Moses understood that his authority and ability to get projects done was greatly enhanced when all the players at the table—developers, unionized workers, good government activists, etc.—received a drink of water. In return for the creation of these “virtuous circles,” Moses was granted more power than any other individual in New York State history. His philosophy was not so much “tax and spend,” as it was “wealth creation through public works.”

Wilmers, on the other hand, has consistently maintained a gospel of austerity, in which budget cuts, staff cuts, and tax cuts are hailed as the keys to economic revitalization. The cherry on top is the removal of the Taylor Law, which in Wilmers’ mind will irrevocably break the power of organized labor. Wilmers believes, in short, that we can cut our way to prosperity.

In return for public employee unions giving up the right to strike, the Taylor Law “requires public employers to negotiate and enter into agreements with public employee organizations regarding their employees’ terms and conditions of employment and establishes impasse procedures for the resolution of collective bargaining disputes.” Wilmers rightfully believes that the public employee unions have become adept at negotiating good contracts, but his remedies for this problem have come under fire of late. Some blame Wilmers for using his money and influence to bring in the current, controversial Buffalo Public School Superintendent James Williams, for example. Just last month AV Publisher Jamie Moses criticized Wilmers’ support of Williams based on the superintendent’s anti-union, pro-Republican pedigree, saying, “…no politician has been willing to try to change the Taylor Law directly through legislation. So if, like Wilmers, you believe public unions are among New York State’s major problems, and you can’t change the Taylor Law, then your other option is to work on breaking the unions.”

Let’s just say Wilmers is right, and let’s say he brings this union-busting approach to bear on economic development projects in New York City. How will this play on Broadway? The recent crane collapses in the Big Apple have turned the spotlight on corrupt practices in the mayor’s office, as crane inspectors looked the other way for cash. Union insistence on onerous safety precautions do inflate the cost of building, but repeated construction accidents tend to hold sway in the court of public opinion, whether they’re corruption-related or not.

Under the Wilmers regime, economic revitalization is contingent upon de-unionization. For example, under the leadership of the Buffalo Niagara Partnership, more IDA money has been made available for low-wage job creation. The Partnership has been a champion of making aid available to retail projects such as the Greater Buffalo Savings Bank retail store on Court Street downtown. The jobs created by this project pay much less than the unionized industrial jobs that IDAs were intended to create.

In a recent op-ed in the Buffalo News, Angelo Vellake, President of the Western New York Labor Federation took issue with this philosophy saying, “There is no economic sense in job creation that is not self-sustaining for individuals and families necessitating increased costs of taxpayer safety nets. We cannot afford to give away the bank for businesses that fail to provide good jobs in our community. When we subsidize low-wage work, the taxpayer ends up paying twice.”

Wilmers and the Shock Doctrine

In April the Buffalo News ran an op-ed by Wilmers in which the banker shared his views on the subprime mortgage crisis. His idea of reform in the wake of this chaos? More power for the Federal Reserve. While that statement alone should give pause to Ron Paul supporters, it’s important to remember: Wilmers was born into banking. It’s only natural, then, that he looks for solutions to every problem within the international banking community.

Naomi Klein’s recent book The Shock Doctrine describes how radical changes in public policy have been made in the wake of disasters such as 9/11. Klein’s thesis is that right-wing policy-makers take advantage of disasters in order to force radical policy change on reeling populations—and that sometimes disasters, especially economic disasters, are fabricated in order to provide the opportunity to starve governments, cut public services, break unions, and privatize publicly held industries such as utilities, transit, and roads.

The subprime mortgage meltdown is a disaster, but is more sympathy for the Fed the solution? Isn’t the power to print money and set interest rates enough? And is the subprime mortgage crisis a natural or a created disaster?

Some, including economist Robert Kuttner, argue that this current crisis was exacerbated by the repeal of a provision of the Glass-Steagall Act, which erected firewalls between the banking and insurance industries. Congressman John LaFalce chaired the the Congressional Finance Committee that pushed for the legislation that passed as the Gramm-Leach-Bliley Act, which effectively repealed Glass-Steagall, allowing commercial and investment banks to merge into behemoths like Citigroup, and paving the way to the subprime mortgage crisis.

Guess who lobbied hard for LaFalce to repeal Glass-Steagall? Wilmers. It was all about modernization, the new economy, and free flows of capital, and it made sense at the time. While we here in Buffalo might not think of M&T as a national brand, it’s worth noting that Arthur Levitt, chairman of the Securities amd Exchange Commission during the Clinton administration, was a board member. Wilmers’ ability to influence national policy is greater than the average Buffalonian might think.

Wilmers is responsible for the creation of two control boards in Western New York, both of which were responses to crises. But were those crises real or fabricated? What kind of economic development is a control board? It’s a shocking development, as Naomi Klein, would say.

M&T’s agenda becomes

the community’s agenda

A recent article in the Buffalo News states that Wilmers has “long backed upstate’s business agenda.”

In fact, Wilmer’s has patiently shaped the so-called “upstate business agenda” to reflect the agenda of M&T Bank. When Wilmers took over M&T in the wake of the savings and loan meltdown of the 1980s, one of his first moves was to bring in his friend and fellow Harvard alumnus, Andrew J.Rudnick. to remake the Buffalo Chamber of Commerce in M&T’s image. Under Rudnick’s leadership the the Chamber of Commerce underwent some name changes and evolved into its current iteration, the Buffalo Niagara Partnership. As the bank grew, so did Rudnick’s clout. But while M&T bank grew and prospered, what happened to the Western New York economy? It stagnated and declined. As early as the mid-1990s, talk of a control board for Buffalo was being bandied about. Meantime, the Partnership supported political candidates such as former Buffalo Mayor Tony Masiello, whose stewardship of economic development vehicles such as the federally sponsored HUD Section 108 program and the Buffalo Economic Renaissance Corporation was suspect at best.

So while M&T presents itself as a benign corporate citizen through its philanthropic endeavors, which support everything from the Buffalo Zoo to the Thursday in the Square concert series, one has to ask: Has the bank’s success come at Western New York’s expense? What would have happened if the so-called “upstate business agenda” was a little more concerned with transparency in economic development initiatives and a little less focused on anti-union trench warfare and Wilmers’ gospel of austerity? The good times of the 1990s brought an economic resurgence to New York City, but none of that “trickled down” to upstate New York.

As Wilmers takes over the State’s top development agency, he faces an interesting problem. He can try to push for greater upstate assistance, but the cupboard is bare. With Bloomberg contemplating a 2010 run for the governor’s mansion, will Wilmers risk alienating his party’s de facto leader? Or will he use his new post as yet another platform from which to propagate his gilded age philosophy?

Joseph Schmidbauer contributed research to this article.

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