Austerity Is Looming in New York. Is Ray McGuire the Mayor to Carry It Out?

“Only bankers and businessmen could cure the situation,” observed John Kenneth Galbraith in 1977, for “[t]heirs indeed was a special, even magical, talent where money was concerned.” Galbraith was sarcastically describing the popular mythology surrounding New York’s City fiscal crisis of the mid-1970s, which saw Wall Street impose a neoliberal austerity agenda on the city.

Over the past two months, the New York Times has been reviving banker magic as a cure for the city’s dire financial situation. The paper’s coverage of the 2021 mayor’s race has uncritically advanced the candidacy of Raymond McGuire, a former Citigroup vice chairman who has never held elected office. Unlike Michael Bloomberg, McGuire was not a widely known figure outside of Wall Street before entering the political arena.

McGuire’s chief credentials are that he’s a black businessman who has succeeded in the very white world of Wall Street. As the Times recently noted, McGuire’s campaign has already garnered the financial support of leading members of the city elite, including former Citigroup figurehead Robert Rubin. McGuire’s street cred, meanwhile, has been furnished by Spike Lee, who narrated the candidate’s initial campaign video that featured McGuire jogging through Times Square.

The Times’ recent coverage doesn’t tell us much about McGuire’s work at Citi. But the paper’s archive provides some details. An investment banker since the mid-1980s, McGuire (who turns sixty-four next month) came to Citigroup from Morgan Stanley. With a successful track record in corporate mergers, McGuire was named as a cohead of Citi’s investment banking division. “This is an opportunity to be part of an extraordinary global franchise,” McGuire told the Times.

McGuire’s move also got him a favorable write-up from Aaron Ross Sorkin, the Times’ man-about–Wall Street. Raised by his mother, a social worker, in Dayton, Ohio, McGuire now embodied the American Dream, serving on elite boards including that of the Whitney Museum of American Art. As Sorkin noted, Citigroup’s reputation was hardly that of a bastion of executive diversity. But according to Sorkin, McGuire was “dismissive of the significance that he will become the highest-ranking black executive of Citigroup.” Only the “less-informed” might highlight that fact, said McGuire, emphasizing his successful track record.

McGuire’s most high-profile success during his initial few years at Citi was in handling the separation of Time Warner Cable from Time Warner. In July of 2009, he was named as the sole head of Citi’s global investment division. McGuire was rising through the top ranks of leadership at one of the world’s most powerful banks. The only problem is that his initial few years there were exactly the period in which Citi and its ilk caused the 2008 financial crash.

Like JPMorgan Chase, Goldman Sachs, and other major industry players, Citi bet big on subprime lending during the few years leading up to the crash. The key player at Citi was Robert Rubin, the former Clinton treasury secretary who was on the bank’s board from 1999 to 2009. As the bank’s stock price was dropping 88 percent in late 2008, the Times identified Rubin — whose main role was as chairman of the bank’s executive committee — as Citi’s “resident sage.” One year before the meltdown, McGuire had compared Rubin to “Yoda.”

Two years after the crash, the US Financial Crisis Inquiry Commission appointed by Congress singled out Rubin and other top Citi execs as potentially “culpable” for deliberate misrepresentation of the bank’s subprime exposure, underreporting it to investors by as much as 76 percent. Nothing came of the commission’s referral to Eric Holder’s Department of Justice for further investigation of Rubin. Meanwhile, despite what Holder later termed its “egregious” practices, Citi was rewarded with $476 billion in federal Troubled Asset Relief Program (TARP) funding.

While McGuire’s connections to any of Citi’s investment decisions regarding mortgage bundling merit further scrutiny, it’s important to recall who didn’t get bailed out at the time: foreclosed homeowners. Two of the hardest-hit areas of New York City were the largely black neighborhoods of Canarsie–East New York in Brooklyn and Jamaica in Southeast Queens, which are also places that McGuire and fellow black mayoral candidates will target for votes. In 2014, Citigroup reached a $7 billion settlement with Loretta Lynch, then US attorney for the Eastern District of New York. $2.5 billion was earmarked for homeowners dispossessed amid the crisis, but how much reached them is unclear.

Over the past decade, McGuire has continued to move up the ranks at Citi, serving as vice-chairman until stepping down to run for mayor. While he has done quite well for himself, it’s not clear how his experience will help him run the city. Mergers in the corporate world are lucrative for the winners. But McGuire’s allies on Wall Street are eager for cutbacks in city spending, which will yield widespread losses for many city residents. Banker magic is a painful remedy, indeed.