(Bloomberg) — For a decade, Wall Street learned to get along with New York Governor Andrew Cuomo as he picked regulators and pumped money into projects backed by the industry. Now that his successor is preparing to clean house, executives are worrying: Will she end the status quo?
Behind the scenes, senior executives are expected to reach out soon to Lieutenant Governor Kathy Hochul, 62, who’s set to become the state’s first female governor when Cuomo departs this month over a sexual harassment scandal. Industry insiders who know Hochul view her as a stable, competent leader who won’t diverge from Cuomo’s policies. But her ascent will still upend a decade of established political order and relationships, clouding Wall Street’s ability to predict what’s to come.
Hochul said Wednesday, for example, that she will replace all Cuomo staffers implicated in an attorney general’s report on his conduct, which had noted that Linda Lacewell, head of the state’s main financial watchdog, sometimes helped the governor respond to complaints about his behavior. Spokespeople for Lacewell’s office didn’t respond to messages seeking comment on her plans.
More broadly, Wall Streeters are wondering whether the new governor will run in 2022, or potentially open up a pathway for a more progressive Democrat to rise and attack the industry. Others want to know whether Hochul will keep driving through favored projects, such as controversial investments in infrastructure and other Manhattan developments.
“It’s an unusual time in New York politics, because for 10, 15 years, there’s been a fairly established pecking order,” said Terry Haines, founder of Washington consultancy Pangea Policy. “Wall Street likes certainty, dislikes uncertainty, and this is a more uncertain situation than has existed in a while.”
Progressive Pick
Hochul, considered to be a moderate Democrat, said Wednesday she supports Cuomo’s policies but hinted at shifting political winds, saying she’s inclined to appoint someone more progressive for her former job as lieutenant governor.
It’s unclear how she may shape the rest of her administration.
Lacewell had served as Cuomo’s chief of staff and counselor before Cuomo, 63, installed her atop the New York State Department of Financial Services in 2019. The office monitors 1,400 banks and other financial institutions with assets totaling more than $2.9 trillion, as well as the activities of almost 1,800 insurance companies with $5.5 trillion more.
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In the past year, Lacewell’s staff hammered Deutsche Bank AG for faulty oversight of dealings with convicted sex offender Jeffrey Epstein. But a review by her agency cleared Goldman Sachs Group Inc. of accusations the lender treated women unfairly when enrolling them in the Apple Card. The watchdog also has waded into a range of issues touching finance, such as cryptocurrencies, diversity and climate change.
Broadly, at least, the new governor will probably try not to startle the financial world, said Erika Karp, founder of Cornerstone Capital Group and chief impact officer at Pathstone, an advisory firm to wealthy families. “She is smart enough to know that we need stability.”
Focus on Projects
The real estate industry is on particular edge. Executives there enjoyed a friendly relationship with Cuomo, who drew big donations and has “been in theory their champion,” according to Mitchell Moss, professor of urban policy and planning at New York University Wagner.
Cuomo adopted fiscal policies and chose projects, such as reviving transportation hubs, that fit into his vision for attracting business and fostering New York as the world’s financial capital. Those priorities were viewed favorably by Wall Street, said Kathryn Wylde, president of the Partnership for New York City, a civic group of corporate executives.
Cuomo also promised when taking office to eventually reduce taxes. “And I would say that’s the attitude most people on Wall Street supported,” Wylde said. “They saw him as defending stronger economies and avoiding actions that would increase taxes.”
The tax promises proved difficult, especially as the pandemic wracked the city. Cuomo backed down, passing a recent budget that increased taxes for the richest New Yorkers.
Shifting Power
Projects that could be affected by his exit include a plan to redevelop Pennsylvania Station and the surrounding area to help reshape Midtown. Vornado Realty Trust, a major New York landlord, owns much of the land targeted for development.
There are already fresh signs of resistance. Inside the Port Authority, staff sent a letter to executive director Rick Cotton this week, urging officials to put the brakes on Cuomo’s controversial push to build an AirTrain to LaGuardia Airport, the New York Daily News reported.
In a statement, the Port Authority said it’s committed to building the LaGuardia AirTrain to help provide environmentally friendly transit. “The policy of the Port Authority is that every concern reported by an employee is taken and treated seriously,” it said. “This will be no exception.”
Without Cuomo’s skill at channeling cash to projects, executives will have to tap power wherever they can find it, Moss said. That’ll likely turn to jockeying to influence lawmakers, he said.
“The legislature is going to be much more important, because the new governor isn’t going to have the same ties to the real estate industry,” Moss said. “The legislature is going to have an opportunity to assert itself on many issues.”
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