Bank raids turn to war

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The Independent Online
CONNECTICUT'S successful attempt to lure Swiss Bank from New York City is another example of contemporary border wars that are beginning to get wild and woolly.

The enlightened 1990s are anything but, judging from the antics of contemporary US lairds in their legislative castles as they compete for big employment prizes. These raids are not about cattle and livestock but about jobs, thousands of them. To triumph, the victors must strike with the element of surprise and carry big war chests. The state of Connecticut did both in luring the dollars 141bn Swiss Bank across the border from New York City.

Crying foul play, Rudolph Giuliani, New York's angry mayor, bought large display ads in Connecticut newspapers last week decrying 'this blatant and unneighbourly raid'. Mr Giuliani warned Connecticut residents that such tactics would ignite a 'bidding war' that would damage both communities.

The cost of stealing Swiss Bank and its estimated 2,000 jobs was much too high. He estimated that Connecticut taxpayers would pay 'dollars 60,000 for each job - an unbelievable amount'.

The escalating battle for business among the interlocking territories of New York, Connecticut and New Jersey is not simply a local phenomenon. In cities and regional centres across the US, there are similar frays as political administrations compete with each other for jobs and capital in an era when the private sector reigns supreme.

Mayor Kurt Schmokeof Baltimore, Maryland, for example, is struggling to hold on to Alex Brown & Sons, the oldest financial house in the state, in the face of competing offers from Pennsylvania and Washington DC. These unfriendly incursions are what Mr Giuliani condemned in his newspaper ads.

The Connecticut legislature met in a special 'emergency' session, called by Governor Lowell Weicker, to clinch the deal. It voted for tax breaks and other incentives amounting to dollars 165m over 15 years.

The legislature must also amend a long-standing state law, which prevents foreign- owned banks from conducting business in the state.

Of course, the real winner is the Basle-based Swiss Bank. It could sit smugly like a much- courted maiden waiting for the victorious suitor to emerge.

Then in late September, it announced that it planned to move most of its 1,500-member work force from downtown Manhattan to a new 20-storey office building that it would construct near the commuter rail station in Stamford, Connecticut.

An additional 700 workers would be hired once building was completed. A stunned New York City administration mobilised its forces to prevent the relocation.

However, New York's efforts were obviously too little and too late. Connecticut officials chortled with delight when an 11th- hour journey by John Dyson, New York's Deputy Mayor to Swiss Bank's Basle headquarters ended in naught. Connecticut officials estimated that tax revenues from the Swiss Bank deal would amount to dollars 300m over 10 years, more than justifying their offer of dollars 165m in tax breaks and incentives.

'The easiest way to describe this deal is that we get 80 per cent of something instead of 100 per cent of nothing,' said Joseph McGee, Connecticut's commissioner of economic development.

Such 'warlike' statements do not sit well with New York City officials who thought they had negotiated non-aggression pacts with most of their neighbouring territories.

Since taking office in January, Mr Giuliani and his deputy have quietly negotiated informal agreements with officials in New Jersey and other New York counties, including Nassau and Westchester, to minimise competition.

In 1991, New York, Connecticut and New Jersey entered into an agreement not to compete for each other's business through newspaper and TV ads or other 'aggressive' marketing techniques.

Now it appears there will be no holds barred. The war of words that ensued after Connecticut's big win and New York's negative advertising blitz have killed the 1991 'non- aggression' pact, both sides agree.

Expect to see more advertising blitzes - remember the 'I love New York' campaign of the 1970s - more secret deals with business, more disgruntled politicans, as New York struggles to hold on to its Wall Street corporate base against the competition.

An unsuspecting foreigner stumbling into the fray would be advised to get first-class professional advice, someone with the diplomatic skills and business savvy to cut the best deal.

This is a competitive environment, in which almost everything can be brought to the table. Make no mistake, the corporate client has the upper hand.

For example, Baltimore's Mr Schmoke will admit privately that he is caught up in a bidding war not of his own making and with few weapons at his disposal.

Baltimore, like other big US cities, desperately needs the tax base that the Alex Browns of the business world can provide, and it also needs the jobs and related consumer spending.

Therefore, the bidding triggered by Alex Brown's threat to move has started at a high level, over very big tax breaks and a centrally located real estate prize.

Alex Brown is demanding an outright gift of 'The Powerhouse', a beautifully restored 19th-century business in the heart of the revived downtown waterfront district. Mayor Schmoke says that the city cannot afford to do it. Stay tuned to see who wins.