9/11 for Psychos, part 2

This is the beginning of a rough continuation of 9/11 for Psychos.

Remember the old joke about the three retired business owners?

Ralph, Joe and Mike, all old friends from the city, ran into each other at a cabana bar on a Florida beach. After initial greetings and conversations about family, they started asking about each other’s businesses.

Ralph said “My business burned to the ground, so I took the insurance money and came to Florida.”

Joe said “My furnace exploded, so I took the insurance money and came to Florida too!”

Mike said, “Wow, what a coincidence! A big flood wiped out my business, so I came to Florida too!”

But Ralph and Joe looked puzzled and said. “How did you start a flood?”

In “Political Ponerology”, Andrzej M Lobaczewski wrote that the criminally insane of the world rise to the top in industry, government, religion, media, business and the military; and I believe this is self-evident. Sane people do not start wars, nor do they build opulent houses of “worship” while wrapping themselves in golden-garments only afforded by soliciting tithes from poor people. Sane people would be embarrassed to use mass-media to propagate lies, just as they would have a bout of conscience pocketing million-dollar bonuses for mass-layoffs, and they wouldn’t even consider fire-bombing a city. Furthermore, the people who are able to do such things are the very people who govern, entertain, educate, and inform us, with the result being that we little-folk believe this behavior is normal, we are taught to admire people who are ruthless enough to be “successful.”

With that in mind, let’s revisit the construction of the first World Trade Center. We are told that on 9/11 the Twin Towers were nearly fully-occupied “cities within the city”, resulting in the deaths of thousands when they were destroyed. But when considering the nature of the people behind the WTC and when viewing the events with the benefit of hindsight, a completely different story emerges.

Once the land was purchased and demolition began, there was no turning back, even for the builders.

Minoru Yamasaki was selected as the architect more than because he would be compliant and discreet, he was an easy mark for manipulation by intelligence services, and he had a reputation for doing what the client wished whether or not those wishes made sense. Where other architects might have balked or asked too many questions, Yamasaki would do as he was told.

By mid-construction, t he commercial real estate market was glutted with office space, providing a very strong incentive to not complete all 10 million square feet, suggesting the real innovation of Twin Towers’ design was they could be the tallest buildings in the world without having to build-out every floor.

Preparations for 9/11 began earlier than imagined, at least as far back as the first bombing in 1993.

The WTC was never fully-occupied at the advertised numbers, and on 9/11 false-front companies were likely the only tenants left.

Good times, bad times

The WTC was conceived during the euphoria of the post-World War II years, with negotiations beginning during the “Camelot” period of the Kennedy administration, a time of growth and optimism. Nonetheless, the project was fiercely fought by local businesses from the beginning. International trade organizations already had well-established infrastructure and besides, international trade accounted for only a small percentage of the Gross Domestic Product anyway, making it tough to convince the City of New York it needed a new World Trade Center. The legal battles dragged on for years. [1][2][3][4]

You know what they say, “Be careful what you ask for”. The Rockefellers and the fellas from the Port Authority of New York and New Jersey (PA) were demanding New York City embrace their vision, and after enough money had traded hands they got what they wanted. They won the court contest, forcing-out all the small-time businesses and residents in the construction zone, but the public outcry had cost them years in delays, and by then it must have been obvious public support would be tenuous at best. By the time construction began in 1966[5], the PA had overstayed its welcome, and thanks to the war in Vietnam, corruption in Washington, and a slipping economy, the national mood was turning sour too.

The Port Authority found itself on the wrong side of history. It should be remembered that the World Trade Center project was born in a period of expansive national optimism, but it was completed during a period of national gloom and retreat. It was in the early 1960s that John F. Kennedy was elected president of the United States. It was the beginning of the Camelot era, when Americans were fascinated with the prospect of a newly imperial, globally engaged, internationalized America. In 1961 the Port Authority issued a report recommending the establishment of a World Trade Center. Kennedy took office, and soon announced plans to send an American to the moon. It was an era of big plans and big dreams. In the early 1970s, as construction of the World Trade Center neared completion, the mood of the country had changed. The United States was exhausted by the divisive Vietnam War and shocked by the Watergate scandal. The World Trade Center, begun in the rosy glow of Camelot, was completed just as the Nixon administration was collapsing. The fact that this large quasi-governmental project was finished at a time when government itself was being questioned has colored all subsequent discourse about the building. During the post-Nixon seventies, new questions arose about the wisdom of large-scale projects. There were questions that had never seriously been asked before about environmental protection, historical preservation, and community participation. [6]

Americans were only fascinated with this new “Imperialism” because it was being relentlessly drummed into our skulls by the “big three” propaganda outlets. None of us would have been interested in a new, internationalized America without the media telling us to be, that attitude was coming from the top. From what I remember, average Americans were jaded by war and embarrassed and disgusted by the corruption[7], consequently in this atmosphere the PA’s big plan for the WTC was the wrong decision at a bad time; it hurt the little guy and spotlighted the disparity between the rhetoric of freedom and democracy, and the reality that money talks.

In order for the PA’s big plans to take shape, a lot of homes and businesses had to disappear, so the good people of Manhattan tried to stop them. But it wasn’t just the little people calling foul, the Port Authority was getting into the commercial real-estate business, albeit without the same constraints facing private businesses. There were legitimate concerns that this was unfair competition – the PA is a quasi-governmental body and when they began competing with private business it was decried unconstitutional.

In those heady days after kicking the Nazi’s asses, these guys must have thought they were immortal. It could be argued that their egos were what drove this project, because by the time they were done force-feeding the WTC to NYC, the bottom was falling out of the construction industry. But they didn’t live in a vacuum. They had expensive lawyers, market analysts, accountants and other assorted researchers at their disposal. Surely they must have known they and their towers weren’t needed. They must have known the concerns were valid that to add 10 million square feet of new office space would flood a real estate market already glutted with vacancies[8]. So did the PA’s stable of consultants have a different set of books than the rest of the city? Were their marketing wizards gazing into a different crystal ball than everyone else? Or were they conducting market any research at all? Of course they were.

Since the end of WWII, New York and been in the middle of an historic construction boom, so the WTC must have seemed like a good idea at the time of conception, but building a new skyscraper is a gigantic task and although the PA was well-versed with large tasks they weren’t expert in large office buildings. A skyscraper is extremely expensive and takes years to complete before rents can be collected, therefore to obtain funding builders follow this general path:

The builder takes an option on a piece of land.

The builder sketches out his building plan in general terms and then approaches prospective tenants. In the beginning, letters of intent are enough to get the ball rolling.

When enough letters have been collected he draws more permanent plans and takes out a short-term construction loan.

When the foundation work commences, the builder seeks leases. At this point the builder is “all-in” and needs commitments. This is the critical stage where he’s far enough along in the project to show prospective tenants his plan has merit and will progress whether or not they sign a lease, but he needs leases or he won’t be approved for a long term mortgage, killing the project and bankrupting the builder. It is for this reason some builders are more cautious and won’t even begin construction without 60 percent of the building leased.

When the builder has 40-60 percent of the leases in hand, he is in a good position to apply for permanent financing, allowing construction to be completed, thereby making it easier to rent the remaining space. [9]

Builders take big risks to build skyscrapers and the PA was taking a big risk which if it went badly could well have ended their authority. They realized they were unpopular, but all the more reason to prove the critics wrong by creating a modern engineering marvel; so with the court cases behind them, it was time to start making the skeptics eat some crow.

Bummer for them then that the economy was tanking, along with New York’s 25-year construction boom.[10]

History has shown that not long after the first jackhammers began rattling the streets of Manhattan back in ’66, the New York City commercial construction industry took a nose dive. Largely blamed on over building in the 60s and early 70s, by 1974 the market in New York was near depression levels. Earlier in the game, Rockefeller clout had landed a couple big “anchor tenants” in the form of the New York State offices and the Customs Service, but that would still leave many millions of square feet of space to rent – below the 40-60 percent mark most lenders want to see when a builder seeks a permanent mortgage. But the PA isn’t your average builder. Even so after the NY State offices moved in, it didn’t take long for auditors to disclose the fact that the State could save 4.2 million dollars a year simply by moving out of the WTC. [11][12] It seems Governor Nelson Rockefeller was willing to waste a few million of the State’s money to prop-up his brother’s project. It is good to be the king but the fact remains that these tenants were barely enough to save a faltering project and after the news came out that they were being bilked on rent, the State threatened to not extend the lease, exacerbating the already poor reputation of the WTC and the PA.

The WTC was in trouble and the PA must have known it before construction began. But after raising such a stink in the courts and after evicting so many residents and businesses they couldn’t very well say “never mind” and walk away. They were already committed to building the tallest buildings in the world, so there would be no turning back now.

Going For Broke

They couldn’t rent the space and they knew it.

Step back for a second and put yourself in their shoes. You are committed to building 10-million square feet of new office space as well as the tallest buildings in the world and you just ruined hundreds of lives to get your way. After wasting years in court proceedings you are ready to begin construction, but now your expensive analysts are warning you that every sign points to a pending recession, making it highly unlikely you’ll ever rent all that space. If these analysts are worth their salt they would recommend you change your plan or stand a chance of going bankrupt if you don’t. What would you do?

This is not an unusual dilemma for builders. Why it was just last year “Lucky” Larry Silverstein ran into the same problem in the same place. I guess the more things change, the more they stay the same. As the PA had experienced the first time around, Silverstein was finding it difficult to land a big anchor-tenant, and was threatening to cancel his 80-story skyscraper, capping it off at a stubby 7-floors. Silverstein did what any prudent businessman would do, since he was already committed to the property, he made adjustments to the plan to avoid disaster. If he couldn’t find the tenants to justify building a skyscraper, then he’d build a mall. But to shave-off 73 floors from an 80-floor tower is quite an adjustment, underscoring the importance of an anchor tenant. [13]

So what would you do if you were faced with the same question? Would you only build one tower instead of two? Would you build-out the whole complex and hope for the best? Would you cancel the whole thing and pay reparations to the people you forced-out through eminent domain? These are the questions I ask myself as I try to fathom what went through their minds as they pondered their options. But regardless what they were thinking, if you believe what we’re told the Port Authority bucked the critics and chose to build-out all the space. They triumphantly created a thriving city within the city despite the high vacancies everywhere else at the time. What a success story! America just loves a winner, am I right? The thing is, because the PA is run like a private business it operates outside the harsh glare of public oversight, so we’re forced to take their word about all this.

Furthermore, these master builders and industrialists have their own police force, the 26th largest in the nation[14], they are not subject to city construction codes or inspections, have debt capacity and tax-exempt status similar to government agencies, and can pretty much do as they please without any accountability. There are only two people on the planet who have any power over the PA and they are the Governors of New York and New Jersey.[15] Is it just me or is this a recipe for corruption?

Speaking of construction, I mean construction – I mean CORRUPTION – New York is and always has been the corruption capital of the country. Corruption has been legendary there for generations, but it has been making headlines for decades. [16][17][18][19][20][21][22]

On top of all that, and besides their fancy titles, university degrees and military backgrounds, the PA is still a bunch of contractors, and I assume everyone has a contractor horror story. I have several. One of the more common themes in contractor horror stories is the inevitable “cost overrun,” the contractor bids low, gets the job, begins work and then runs into ‘unforeseen’ costs, transferred of course to the client who has no choice but to pay because they’re mid-construction. Well, the scale of the project doesn’t necessarily change the integrity of the contractor, as we can see in Ray Monti, the Port Authority’s construction manager for the World Trade Center. In 1994 he candidly discussed this unspoken rule of construction:

“There’s a natural tendency in all government projects to want to convince others to authorize you to proceed. One puts a favorable interpretation of the facts. If you reveal all the problems, you are never going to get the thing going. Besides, there’s another basic principle here. Once I’m started, what are you going to do to me? Stop the building in the middle? We’re now rolling!”[23]

But this is a double-edged sword when the contractor is also the client, remember they build their projects to pay for themselves, they don’t collect taxes to pay for the stuff they build, they pay for it by charging taxpayers to use it. But again, this is New York City – the Mob runs that town, just as they do everywhere. The Port Authority was building a huge project that required thousands of construction workers, and there are few industries more corrupt than the New York City construction industry. [24][25][26]

This was the sleazy underbelly in which the Port Authority thrived. Every single building, bridge and tunnel was built with Mob-controlled labor. When factoring in the PA’s own shady background, a private police force and no accountability, you’d have to be a barking lunatic to believe them when they say they were able to lease 10 million square feet of unsafe[27], gloomy, non-standard office space without light switches[28] or sprinklers[29], when the rest of New York was facing a severe commercial real estate glut with office buildings falling into foreclosure at a rate approaching the 1930’s.[30]

So it was in this corrupt atmosphere of labor rackets, political payoffs and extortion that the Port Authority of New York and New Jersey was faced with the dilemma of either building-out all 10 million square feet – or not. If it was me, I would have canceled at least one of the Towers, or pulled a ‘Silverstein’ and put up a 7-story stump (and named it WTC7 – hah!) but I would definitely NOT have spent hundreds of millions of dollars building-out space that couldn’t be rented. That would be stupid.

But these guys aren’t stupid, they’re smart guys – wise guys.

I consider myself relatively normal, and by that I mean I have a conscience and I have empathy for my fellow beings. But I don’t consider extortionists and racketeers to be your average Joe; else everyone would do it all the time. It takes a special kind of person to be in the Mob, and I’m happy to say I don’t pass that muster. Rolling over the lives of the little people is what the people in power do all the time, but were these Porta Tority fellas the kind of people who would be able to sacrifice a few small fry for the sake of the greater good? You betcha; eminent domain anyone? Military men are trained to do their duty even to the point of sacrificing their own lives for the sake of the greater good, and remember, the PA was chock-full of ex-navy folk – it is a port, after all. But they were going wildly over budget and were embarrassed by their own cost-overruns, much to the delight of their competition:

A major embarrassment for the Port Authority occurred in December 1966, when Austin Tobin was forced to announce publicly that the cost of the World Trade Center had increased to $575 million, up from the original estimate of $350 million. Critics of the project immediately complained that the new figure was unrealistically low. They hinted that the agency was “notching up” the total little by little rather than face the embarrassing truth of the staggering cost of the project, described as “grandiose” in conception. A spokesperson for the Committee for a Reasonable World Trade Center, a group of private real estate operators, said: “They couldn’t build it for $525 million; they can’t build it for $575 million, and they won’t be able to build it for $625 million. On that basis, they’ll never be able to make it run at a profit, and it will be a drain on their resources.” The chairman of the committee was Lawrence A. Wien, head of the organization that operated the Empire State Building, which at 102 stories would obviously have to give up its long reign as the world’s tallest building upon completion of the center. “Our minimum estimate is $750 million,” Mr. Wien said, “and some think it will go beyond $1 billion. I think they owe it to the public to make a full statement of how they arrive at such a figure. This is not the way to present cost estimates by an offhand statement over the telephone from some spokesman. They should make public the figures on which they compute such a cost. They’re inching up. If they keep going, they’ll hit the $1 billion, I’ll tell you.[31]

For whatever their motives, the critics were predicting the PA would either ruin an already terrible real estate market, or never be able to break even, or both. Well what if the critics were right and what if the PA knew it?

By 1974, with a hundred million in cost overruns and losing 10-25 million dollars a month[32] the WTC was turning into the Port Authority’s albatross. To continue to build-out space that would likely never be rented makes no sense. The incentive was clearly there to stop construction, or at least to change the plans. But being guys with big egos and macho backgrounds, to only build one tower would be akin to admitting defeat, and besides the Twin Towers were being used as a marketing gimmick to attract new tenants, so the incentive was also there to build the tallest buildings in the world. They may have been shy on prospective tenants, but one thing they weren’t shy on was chutzpah. These guys had all kinds of connections to the military, especially the navy whence we get the Office of Naval Intelligence.[33] They had the same connections as the guys who were just ramping up the “moon-shots”, so there was plenty of chutzpah to go around.

If it was me, I would have considered designing them in such a way that they could build-out space as-needed. I would consider any option, but this one makes a lot of sense from a business perspective. If the economy never turned around, they would never need to finish the space, saving hundreds of millions of dollars in HVAC, electrical work, plumbing fixtures, elevators, etc., but they’d still be able to claim the tallest buildings in the world. Certainly their brainstorming sessions must have included the question “can we build them tall without filling them up?”. We’ll probably never know what they actually decided, but judging by the history of events and the character of the people involved, I’d say Lets Roll Forum’s Phil Jayhan and Larry McWilliams were correct when they labeled them ‘Hollow Towers” – all signs indicate the Twin Towers were never fully completed as advertised.

Being the PA, they already had privacy and no accountability, but what they needed was an architect who could design the tallest buildings in the world but to design them in such a way that they didn’t need to build-out all the space immediately; to design them so they could build-out a fraction of their advertised space, but still claim to have the tallest buildings in the world.

Enter Minoru Yamasaki.

(to be continued)