Wall Street Troubles: Are They Too Much to Bear?
No Panic in New York -- So Far

By ' David Segal
Washington Post Staff Writer
Tuesday, September 16, 2008

NEW YORK -- If you're one of those Manhattan-haters who hopes the city has been truly smacked upside the head by all the grim news out of Wall Street, listen to Alan Matarasso, a plastic surgeon with an office on Park Avenue.

In recent months, there's been little drop-off in the number of face pulls, breast augmentations and tummy tucks he does. Actually, he says, the turmoil has caused an uptick in a certain type of client: the laid-off, mid-career executive who wants to hit the job market looking as taut as possible. The only hint of bad news is that some clients are suddenly getting cost-conscious -- for instance, the teenager who recently came in for a nose job.

"I had worked on three of her siblings," Matarasso said. "Now, normally I charge $9,000 for a nose job, but we knew for a fact that her father had had a change in situation, so we worked with that person. We didn't charge an operating room fee, which is about $2,000."

Matarasso paused for a moment.

"We're not a discount store," he said, "but we're in the business of making people happy."

Take note, rest of the planet: It'll take more than a couple of belly-up brokerage firms to put the hurt on this town. Not that there is any lack of dread here. Anytime the mayor takes to the airwaves, as Michael Bloomberg did yesterday, to offer a pep talk and a Xanax to the locals, they worry. And no matter how comforting Hizzoner's words, there are plenty of plot twists that could yet change this movie into an economic horror show. Some companies are already getting singed, and plenty of people worry that they're about to get burned.

But for the time being, there's little evidence that hard times have hit Gotham. What's amazing is how economically impervious the place remains, even with megafirms such as Bear Stearns and Lehman Brothers closing. We're talking about a place where 3.5 million people work every day, said Mitchell Moss, a professor of urban planning at New York University, so the city can roll with a lot of punches, even a mass layoff of very rich people.

"There will be a decline in sales of Cristal, and a lot of high-end restaurants in the suburbs will get hurt, because the suburbs are where a lot of these finance guys live now," Moss said. "But this isn't a one-industry town."

This resilience will, of course, disappoint those of you who have been hoping that a downturn will take some air out of the monster truck tires that have long been the city's economy. You are one of those people if you noticed that yesterday's New York Times wedding announcement pages included a few employees from Lehman, and you said "Awww" in a mildly sarcastic tone. Maybe you just hate the Yankees, or perhaps you prefer the place the way it looked in bad old "French Connection" days of the '70s, when it still was a little dangerous. You might even live here and dream about the day when real estate craters, big time, and you can buy in.

Well, for the moment, you'll have to keep dreaming.

"I don't think the vultures will ever be well fed in Manhattan," said Pamela Liebman, CEO of the Corcoran Group, a real estate firm.

A few Lehman-ites have put their homes in the Hamptons on the market in the last couple of days, Liebman said, and others have pulled out of negotiations on deals that were imminent. A lot of potential buyers and sellers are in holding-pattern mode, waiting for a hint about what's coming next. Which is to say that signs of panic are very hard to find.

"There isn't a huge inventory out there, and there aren't that many people who have to sell," Liebman said.

Here's what else New York has going for it these days: foreigners. Lots and lots of foreigners. They're coming to town and picking up where U.S. buyers are leaving off. Gallery owner Jeffrey Deitch says that in the past six months, his business would have cooled were it not for all the Russians, Middle Easterners and Asian buyers who took up the slack.

"One of the biggest problems in the art market now is that when people come from the Middle East, they have such a humiliatingly long time getting through JFK Airport some of them aren't coming anymore," Deitch said. "You write for a Washington audience. Tell them we need visa reform!"

Without foreigners, the high-end hair stylist who calls herself Ouidad -- that's it, just Ouidad -- would be in the red. In her salon near 57th Street and Fifth Avenue, she noticed lately that a lot of American clients who once came every 10 weeks for a cut are now coming every 13.

"Others used to get a whole head of highlights, now they get partial highlights," she said. "Thank you, foreigners."

Any discussion of the Big One that might someday hit New York has to include the possibility of a recession in Europe. The way-out-of-towners are now so essential that restaurants have started catering to them.

"One of our general managers added a wine list with the prices in euros," said Paul Bolles-Beaven of the Union Square Hospitality Group, which owns 10 of the Manhattan's most beloved restaurants, including Gramercy Tavern. "It's a good idea because it saves the customers from unnecessary math, and they can see directly that with the exchange rate where it is, they're getting a great value."

For those industries that can't avail themselves of the healing power of foreign money, the suffering has started. The caterers, for instance, are already groaning. Bryan Jacobsen, who runs a company called CEM, now earns a measly 1 percent profit on many of the events he bids to cater.

"I used to charge about $14,000 for a 100-person cocktail party," he said. "Now, I'm lucky to charge $9,000." Just as bad, the phones aren't ringing for holiday parties. "I should be getting about five or six calls a day, and I'm getting about three per week. The party is always the first thing to go. They cut what they consider fat."

The lean could be next. It is not hard to find economic forecasters who believe that the expiration of Bear and Lehman is but a prelude to a grinding recession, or worse. As soon as you hear someone mention "credit default swaps," you know you are in for a totally reasonable-sounding explanation about the terrible fates that will befall New York. There are even those -- such as Christian Menegatti of RGE Monitor, a research and consulting company -- who say that the entire "securitization model" that has guided nearly all Wall Street finance in the past few decades is about to go kerflooey.

"I'm sorry that I can't say anything positive," Menegatti said, "but what is happening now is really worrisome."

He might be right. We might be on the verge of doomsday. It just hasn't happened yet, and until it does, what passes for agony today in New York is the sort of decision that Madison Avenue Limousine recently made.

"We were just about to buy a Bentley for our fleet," said director of concierge services Daniel Sasse, "and we decided to go with the Mercedes."