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The Ghostbusters of Liberty Plaza
Occupy Wall Street’s decision to use Liberty Plaza in lower Manhattan as its base camp is meant to evoke comparisons to Cairo’s Tahir (Liberation) Square, the focal point of the popular uprising in Egypt earlier this year.
Yet the concrete plaza (also known as Zuccotti Park) turns out to be a fitting symbol of the big business debacles that the new Occupy movement is condemning.
Looming over the space is a hulking 54-story office building known as One Liberty Plaza, which is part of the real estate portfolio of Brookfield Office Properties, also owner of the plaza itself. The skyscraper, completed in 1972, was originally the New York headquarters of U.S. Steel.
By the time U.S. Steel moved into the building, the company had begun to lose market share and was embarking on an ill-fated diversification process. Within it few years it liquidated more than a dozen mills and spent more than $6 billion on the acquisition of Marathon Oil. It continued to shed mills, and in 1986 it purchased another oil company and changed its name to USX to reflect its retreat from the steel business.
After fighting off a takeover bid by corporate raider Carl Icahn, USX underwent more restructuring and finally decided to spin off its oil operations and reclaim the U.S. Steel name. After 9/11 it unsuccessfully tried to engineer a merger of all the U.S. integrated steel companies into something that would have resembled the steel trust assembled by J.P. Morgan at the beginning of the 20th Century. Today U.S. Steel is far overshadowed by foreign competitors, especially ArcelorMittal.
In 1980 U.S. Steel had sold One Liberty Plaza to Merrill Lynch, which was then riding high atop the stock brokerage business. A year after the sale, Merrill’s chief, Donald Regan, went to Washington to serve as Secretary of the Treasury in the Reagan Administration. Regan had initiated a process of diversification into international banking, real estate, insurance and other financial services.
Merrill, which had always prided itself on serving the individual investor, became increasingly involved in wheeling and dealing. In the early 2000s Merrill’s reputation was seriously tarnished by its close ties to the corrupt Enron Corporation and by allegations that its analysts were strongly touting dubious internet stocks for which Merrill was providing investment banking services.
In 2007 Merrill’s CEO Stan O’Neal was ousted after the firm was forced to take an $8.4 billion write-down linked to sinking securities backed by subprime mortgages. Amid the meltdown of Wall Street in September 2008, Merrill Lynch avoided following Lehman Brothers into oblivion only by agreeing to be taken over by Bank of America. There was later a furor when it came to light that Merrill rushed through some $3 billion in bonuses before the merger took effect.
In 1984 Merrill Lynch had agreed to sell One Liberty Plaza to the real estate firm Olympia & York (O&Y) and move its headquarters to the World Financial Center development that O&Y was building a few blocks away in Battery Park City.
O&Y, under the control of the Reichmann Family, first amassed holdings in Canada and then made a splash in the New York City real estate world with an aggressive series of purchases. By the mid-1980s it had become the largest real estate company in the world while also investing heavily in natural resources companies such as Gulf Canada. Its dizzying growth came to an end in 1992, when it could no longer handle its $18 billion in debt and was forced to file for bankruptcy.
The man who ran O&Y’s U.S. real estate operations was former New York deputy mayor John Zuccotti—the guy the park is named after. He stayed on after the bankruptcy filing, oversaw the sale of O&Y’s portfolio to Brookfield Properties and was kept in place by Brookfield. He is currently on the board of directors of what is now known as Brookfield Office Properties. So far, Brookfield has avoided any fiascoes of its own.
Yet the previous owners of One Liberty Plaza—U.S. Steel, Merrill Lynch and Olympia & York—haunt the office building and Zuccotti Park. Their track record of foolhardy restructurings, reckless borrowing and unscrupulous investment practices are emblematic of the misdeeds of large corporations over the past few decades. Those practices have enfeebled the U.S. economy and diminished the living standards of all but a narrow slice of the population.
The Occupy Wall Street movement is, in effect, trying to exorcise these demons. And the ranks of the ghostbusters in Liberty Plaza and elsewhere seem to be growing every day.