Monday, April 19, 2010

L.A. Update: Wall St. Insiders Have Captured L.A.'s $50 Billion Infrastructure Budget

by Tom Garrett

Austin Beutner, First Deputy Mayor and Chief Executive for Economic and Business Policy was a featured speaker at a meeting of real estate developers in Los Angeles last week - his introduction forgot to mention any of his work at Blackstone or Wall Street.

He began by noting that 2010 is only a warm up for LA, financially things get much worse in '11 and '12. He was very clear that the city is a "service provider" and his job is to advise the mayor on how to provide better service - privatization of City services is not an option, "we must innovate and reorganize" - he gave no details as to what the re-organization of LA will look like "that is confidential."

Nevermind that we in the audience pay his salary and the mayor's salary and voted the mayor into his job - why should we know what is going on behind closed doors, it's not like politicians and men from Wall St. investment banks have ever done anything to loose our blind faith in their benevolence!

In "code talk" it was very clear that his next position will be a temporary job as the manager of DWP - its top position. The talk then went to AB-47, an environmental bill that will give DWP great authority to raise rates under the guise of helping the environment. Even more interesting, the next topic was the sales tax increase LA passed last year to pay for infrastructure improvements. He is working to help LA borrow against 30 years of the sales tax increase to complete all infrastructure work within the next 10 years.

Finally, he will work to pull in federal money to plus up LA's efforts to improve infrastructure. There is going to be a lot of money spent by DWP and the City on updating infrastructure - we should really watch which companies get contracts and how they are connected to Beutner.

He noted that his staff is mostly comprised of young "go-getters" from private industry working under a fellowship. He bragged that taxes do not pay their salaries, but rather a few companies that he solicited made donations to cover their salaries - it would also be interesting to find out who these companies are and if they receive preferential treatment.

He noted that LA should be more like Chicago and NYC - with powerful executive Mayoral offices. As he spoke, it sort of made sense, until you wake up and realize that on so many levels chicago and nyc are total failures and mimicking their political structure will only lower the quality of life for residents of LA.

Beutner is advising the mayor on who to place on the LA Port, LA Airport and DWP Board of Directors - I assume he will be stacking the Boards with allies. Beutner's work includes attracting businesses to LA - he noted that he is working with a top electric car company and trying to bring them in. I would not be surprised if it is CODA, an electric car company with Hank Paulson on the Board, it is based in a neighboring city, Santa Monica.

In passing he said, Latin America and Asia will be the future of growth.

Conclusion: Beutner is an intelligent guy with an uncanny ability to avoid answering questions directly and still win the audience over.He is clearly working behind the scenes to capture infrastructure contracts for his friends.

For a young man who went to some of the best government run schools (public K-12 and UCLA) - I'm shocked and depressed to realize government is a tool for the power elite to withdraw huge sums of cash from regular working people and repress free market innovation in order to protect their legacy businesses.

Tom Garrett is a member of a Los Angeles based association of real estate developers. Once a month guests from industry and government are invited to give a talk. Last week Austin Beutner was the guest.


  1. Here we see crony capitalism working through public private partnerships. There has been a gradual erosion of morality and ethics in business and government beginning with the repeal of the Glass Steagall Act in 1999, and continuing on through the building of an archipelago of military bases in Asia and Europe, to Congressional earmarks, to now Illinois style crony municipal government in Los Angeles at wasteful and abusive expense to taxpayers. All of these things are bringing in an entirely new era: the age of authoritarian rule.

  2. I sympathize with theyenguy but apparently he has not seen Chinatown, a movie staring Jack Nicholson set in L.A. in the 1930's. In many ways that movie is being repeated in real life before our eyes.

    Sadly the "erosion of morality" has a much longer history than the repeal of the Glass Steagall Act in 1999. In fact the enactment of Glass Steagall in the 1930's was an acknowledgement of the moral hazard created by the FDIC as Glass Steagall attempted to limit the damage. And so Glass Steagal was actually a part of the "moral erosion." Although rather than erosion I would call it the eternal battle between a respect for the human right to life and its pursuit of success versus the temptation to use force against our fellow man to further our own success.

  3. theyenguy: it is funny you mention public/private partnerships. Austin spoke glowingly of them and listed CHI and NYC as prime examples. EPJ readers see through what he is saying, but the audience seemed to agree that it is some new innovation that will help the economy.

    Efinancial: I agree with you. However, it is a scary paradigm shift for people to see government as a tool of the power elite, rather than a well intentioned but inefficient organization.

  4. Tom - Some may try to convince you that they believe govt is "well intentioned but inefficient" but I would reserve judgement about their intentions.

    I have dealt with businesspeople throughout the US and over the years it has become clear that regarding govt power their primary fear is that they won't get to use it robustly enough against their competition. Adam Smith was right about this and the founding fathers had the only solution - prevent the concentration of power by investing it in numerous entities. The most important being the individual. Its not perfect and as B. Franklin noted you must constantly fight against the tendancy for humans to concentrate power for their own advantage.

  5. P-P partnership is a complete racket and goldman is in the middle of it too.
    I think they are using them at the world bank, with the same old actors, Rabobank and such.. through that former goldman guy there..
    I did a piece on him - used to be a trade rep forever in the us gvt.
    Can't remember his name now.