As you might have seen in the papers, the Intercontinental Exchange, based in Atlanta, recently purchased the New York Stock Exchange.
Which, as the name suggests, is based in NYC. Hey, you don’t need an advanced degree in economics to figure that out.
The important thing to note is that in the aftermath of this transaction the Statue of Liberty did not hop into the New York Harbor and the Empire State Building did not run off to New Jersey.
I mention this in contrast to the reaction in Chicago in 2007 when ICE was battling the Chicago Mercantile Exchange for control of the Chicago Board of Trade.
Oh my god, to hear Mayor Daley fume and fret you’d have thought that the Cubs and White Sox together were about to move to Tennessee.
On second thought—take ’em, please!
The details of the Board of Trade debacle came down to this. One set of gazillionaires—the owners of the Board of Trade—had to decide which offer from another set of gazillionaires to accept: ICE’s or CME’s?
At this point, I should mention that the owners of CME were long-standing campaign contributors to Mayor Daley, while the owners of ICE were not.
Mayor Daley insisted that it would be a massive blow to the collective self-esteem of Chicago if the Board of Trade were to wind up in the hands of gazillionaires who live in Atlanta as opposed to gazillionaires who call Chicago their hometown. So he offered millions in tax increment financing (TIF) dollars to CME if and only if the Chicago Board of Trade accepted their offer.
In other words, take the CME offer and your newly formed company gets the TIF money. Take ICE’s offer and you don’t.
A few other things you should know about this deal: When I originally wrote about it, a spokesman from CME told me that they hadn’t asked the city for the handout. Instead, Mayor Daley had offered it of his own volition. And a spokeswoman for ICE told me that they had no intention of moving the Board of Trade anywhere. That it really didn’t matter where the board was officially located since the industry’s moving toward electronic trading, which can be done anywhere, including a boat off the coast of Florida. Which, for all we know, is where most of the people who own these trading behemoths actually spend their time.
No matter. Daley offered the money that CME said they didn’t request to keep ICE from doing something that they said they had no intention of doing. Effectively, Mayor Daley offered your property-tax dollars to give one billion-dollar corporation a leg up on another billion-dollar corporation in a bidding war to buy out a third billion-dollar corporation.
It’s good to remember this little saga just in case you ever find yourself believing there’s a rhyme or reason to how our leaders throw around this TIF money—other than taking care of old friends, that is.
When the dust had settled, the Board did indeed take CME’s offer. And Daley offered CME—one of the wealthiest exchanges in the world—$15 million in TIF money, provided they keep at least 1,750 employees in Chicago for ten years.
Eventually, CME turned down the $15 million. That’s because they were threatening to move out of town if the state didn’t give them a tax break worth tens of millions of dollars. And you can’t very well threaten to move out of town if you have an obligation to keep 1,750 jobs in town.
So CME swapped the TIF handout worth $15 million with strings attached for the tax break worth tens of millions no strings attached. Hey, no one said these dudes were dumb.
That means you, the taxpayers, get to pay more in taxes to compensate for the break that CME is getting. Hey, no one said you were smart.
To throw salt into our wounds, Mayor Emanuel immediately hailed the tax breaks as “reform.” You know our mayor would never miss a chance to suck up to the big boys and girls who dole out the campaign contributions.
Back to the ICE/NYSE transaction . . .
I plowed through page after page of New York Times coverage but could find no reference to any New York politician opening up the public purse to somehow block the deal.
Lucky New York.
In reality, it doesn’t really matter where these exchanges are based. They’re not job-creating machines. As I said, they’re moving as fast as they can toward electronic trading. Which means they’re cutting jobs that require them to pay salaries to other people, as opposed to keeping more money for themselves.
The primary benefit of having any exchange in town is the ability to tax its transactions. But no, our leaders gave them a tax break and then thanked them for taking it.
By the way, firefighter Sam Holloway recently revived this issue when Mayor Emanuel made one of his bizarre firehouse visits.
That’s when the mayor unexpectedly stops by a firehouse to tell firefighters that as much as he appreciates them, he has no choice but to cut their pensions.
That’s so he has more money to hand over to companies like CME.
Apparently unable to hold his tongue, Holloway told the mayor that he indeed had an alternative to cutting pensions—he could slap a transaction tax on CME. To which the mayor told Holloway he should run for office if he wants to do stuff like that.
Well, at least he didn’t tell him to “shut the fuck up.” Which is what Emanuel told Eric Holder when the attorney general tried to extend the ban on assault weapons.
In the wake of Newtown, Mayor Emanuel’s become a gun control guy. I’m sure it’s only a coincidence that polls show that even swing voters in Virginia want some kind of gun control.
Maybe there’s hope for ordinary taxpayers should the polls show an upswing of support for progressive taxation. Then we might see Mayor Emanuel leading the charge to end crony capitalism.
It’s a very long shot, I understand. But it gives us something to hope for in 2013. Happy New Year’s, everyone!