tv Book Discussion on Capital Murder CSPAN September 13, 2015 6:45pm-7:46pm EDT
>> welcome. i'm director of the state library of pennsylvania. you are sitting currently in the library which is in the process of being restored back to its original grandeur from when the building opened in 1931 and let's look at the beautiful murals. they are falling apart. the existence in 1745 and purchased the first set of the books and they are still in the folks downstairs. at some point if you would like to take a tour we do ask its done when you have an open house. one basic housekeeping thing what you put your cell phone at
least on silence or preferably turned off. we all know that if you're taking when you hear a cell phone ringing in the middle of a speech. today we are welcoming the author of a narrative nonfiction book called capital murder which was released may 12 this year. he's currently an investigative reporter for abc news affiliate in washington, d.c.. before that he spent four years in harrisburg covering the extraordinary financial collapse. now he has released a book sharing his experiences while detailing what went wrong. capital murder is a cautionary tale of what can happen when the government is not adequately monitor. it portrays in vivid detail how life deteriorates under the inept or dishonest administration. every municipality in america
should understand what happened to harrisburg to avoid a similar fate. we must ensure that what happened to come into any other city. that is why the book was written. please join me in welcoming. [applause] thank you everybody for coming out on what might be the greatest weather day of the year i'd really appreciate it and the reason that i wanted to come here today is because of the significance of what happened in harrisburg pennsylvania. over the past 30 years it hasn't been reported. people were not telling the stories about what was going on in the city and how it grows from a really bad decade before that becoming a city that had to
file for bankruptcy. on october 11, 2011 harrisburg pennsylvania did something no other capital city in this country had ever done before and in doing so, the city we captured by historical significance that it once had. there's not that much big national news that comes out of harrisburg pennsylvania and some say that is a good thing if no news is good news but it also means that the influenza in the area it doesn't have the significance that what is more news working out of the area. here is byrd used to be significant in america. i get a bunch of examples in the book how harrisburg forged the way that america moved forward with steel and railroads throughout the industrial
revolution. and i tell one story where during the civil war the general robert e. lee marched his army of northern virginia twice trying to invade the north first he was stopped in antietam and the second time he tried it he was stopped in gettysburg. both times he was coming here to harrisburg. it was the heartbeat of this country that centered here and send the goods and materials into the product, the soldiers for the civil war and generally knew if he could get here and disrupt the railroads which are just half a mile from where you are sitting now, if he could do that he could suffocate the
north. but that is the sixth against it once had. there's not really anybody alive today that saw the significance of the city. but on that cold october night, harrisburg reclaimed a part of the dickens when it became the first capital city ever in america and still the only capital city to file for bankruptcy. this isn't supposed to happen in a capital city. they are supposed to be recession proof and that's why it's never happened before. they are sending their tax dollars to harrisburg and you have tens of thousands of people coming into the city every day to work for the state. people that are paying taxes and biting parking spots and buying food and gas and groceries. harrisburg like other capital cities have this economic driver but it's supposed to prevent economic catastrophes from happening. that's why no capital city has ever filed for bankruptcy except for this one so how could that
financial infrastructure have such a significant financial problems. that's why a road capital murder because people in america need to learn. we need to learn what happened to so it doesn't happen to more of the cities. more of the cities go through but harrisburg went through not just the people inside of the cities. it has other effects in the municipal bond market for owning mother to other -- money to other cities. that's going to affect the municipal interest rates for many other cities. this isn't just about harrisburg pennsylvania. this is about america. so inside of the pages of this book it took me four years to write this. for years to write this book and enough time i hope i captured
what the city did wrong. and others can learn from it so i think in the speeches a lot of people ask me why is it called capital murder trade weighted yugo with the term murder terri and during my four years i investigated what was happening in the city and it was clear to me that this city was financially murdered. but apparently nobody cause the death because the whole time i worked here and up until this book came out there have been no charges. there've been no indictments or signs. the people that drove the city into bankruptcy faced no accountability, none. i thought that was wrong. the people in the city suffered when their government failed them. we are going to get into some of the examples of how people suffer when the government fails them but the people here suffered, and nobody was ever
held accountable for that. after the book came out, which we will go into a little bit later to historical significance took another giant leap. this just happened a short while ago and we will get into that at the end of the book at the end of the talk. so, the first thing i want to do is introduce you to the main character in this book, and also in harrisburg in general. this is when he was inaugurated, 1982. he ended up being the mayor for 28 years. for seven terms he led the city to 2010 from the time he was 32-years-old he left office when he was 60-years-old. this is a man that took over the city that nobody else wanted to lead. throughout the 70s, harrisburg
pennsylvania lost 25% of its population and 25% of the population is a 25% of people that could afford to leave, leaving behind a 75% of the population that couldn't afford to leave and when the 25% (-left-paren if they took with it their tax dollars. they took the resources, they took their intelligence committee took with it what would make the city thrive left with the 25%. you combine that with the railroad that had already collapsed and the manufacturing was gone and now 25% of the population is gone in 1982 when he came into office it was rumored the bankruptcy papers were left on his desk when he took office because the city was dead. and i think if you look at the financials at that time you would agree that it was probably dead. 28 years later he is still the
mayor. how did that happen? steven reid i believe absolutely loved the city. he wanted the city to be great. he wanted the city to reclaim the historical significance that it once had. i compare him to bernie made off. bernie made of wanted his investors to succeed. bernie made off onto his investors to get rich. he wanted them to be prosperous. he didn't want to get caught. bernie made off didn't want to get caught created they were both willing to do whatever they have to do because they were focused on their objective. it looks like steven has stephen has been caught after this book came out and we will get to that a little bit later. but what he ended up doing is when he came into office in 1982 as i said, the city didn't have much of a tax base so he had to
use what i call financial tricks, accounting tricks. he had to find ways to get to the city and then he would take that money and reinvest in the city. i will give you a couple examples. in the early '80s he borrowed $300 million, 300 million-dollar a 300 million-dollar loan came into the city to build across the river a half-mile wide beautiful giant river. you didn't see the hydroelectric but that got blown to the city. $300 million. he had no intention of ever building the dam. the people signed off on the loan and there was no intention of ever building the dam.
the intention was to reinvest the money and as the reinvest the money there are fees that are paid out it's called arbitrage and they are paid out he would take the money from those fees and that's one of the ways he would get the money to funnel back into the city. now, arbitrage has since been made illegal. you can't do that anymore. so they would get money from the city and most of it involved the municipal bond market working with him and wall street getting wall street bankers and the attorneys and the accountants, the consultants to load the city money and in the process he would keep scraping off the fees and he would use those to reinvest back into the city and he kept taking chances and as he became more powerful and as he kept getting reelected over and over again the chances that he would take the risk became
greater on so there was a final risk that he took that was something that should not have happened and ended up bankrupting the city. during his time that he was the mayor, wonderful things were happening in the city. again in 1982 when he took over the crime was high in taxes for the tax revenue is low and the morale in the city was low and he was able to turn the city around. he was the best mayor in america and the third best mayor in the world. he was doing the things that nobody understood what was happening to the city. i only met him three times in the four years i've worked here as much as i chased him around i only had three encounters with him via they are detailed in the book because all three of them led lead to a better understanding for me and how the
city got to where it was but also its lead me to if led me to a better understanding of how he saw his role in the city and the first time i met him was was in the national civil war museum for the tenth anniversary of the me with the him and he had explained to me his philosophy when he was running in harrisburg, and it involved institutions. what he said to me was when i took over here is burkett had no institution. there is nothing here to draw people here so he created those institutions. the more people moved into the city at its start a snowball effect and that was the way that he operated the city and during the time that he was here, much of what you see a round of the city is a beautiful result of him. ..
>> the civil war museum, the pennsylvania national firemens' museum, harrisburg university. he created all of these institutions using a lot of these financial tricks, reinvesting that money back into the city that he was getting through the municipal bond market, most of it, with the lawyers and wall street that he was getting very, very cozy with. and they were more than willing to loan him this money even if a
certain percentage of that money that was being loaned wasn't going to the project that it was originally loaned for. downtown harrisburg, second street, restaurant row, block after block of restaurants and bars. all of that was steven reed. people started coming back into the city. as i said, this the 1970s 25% of the population left this city. two decades after he was the mayor, the population started going up again. a remarkable turn of events. and that's why he was winning all these accolades, and that's why nobody was even running against him when he was up for re-election. multiple times he would get the republican and the democratic nomination. i say in the book, and i firmly believe, steven reed became a dictator. nothing in this city could get done without stephen reed's blessing on it. if you wanted to be a member of city council, you're not going to get on city council unless steven reed, the mayor for life,
unless he supports you. if you're on city council and you don't do what the says, he doesn't support you for re-election, and you lose. if you want to be the treasurer, if you want to be the comptroller, you don't get to those positions unless he supports you. if you want to open a business in harrisburg, you can't open businesses without his support. you can't do anything in this city without steven reeled's support. -- reed's support. and the people allowed it to happen, happily allowed it to happen. he was winning re-election by incredible margins, especially when nobody was running against him. the people saw what he was doing, they saw these institutions, they saw what the city was in the '70s and early '80s, and they just believed in him. and they believed that everything that he was going to do was in the best interests of this city. the news media allowed it to happen. news media was not holding him accountable, and that was one thing that, that really troubled me when i got here as a member of the cbs affiliate.
the television stations and the newspapers here just let him do whatever he wanted. and people knew what he was doing. it was no secret. people knew what he was doing with the bond market. i'm sure a lot of you have heard about the artifacts that he was buying and the artifacts that he was selling. those weren't secrets. that was just steven reed. he's got the best interests of the city at heart. steven reed's not going to do anything to hurt this city. he's going to help this city. and that's the way that a lot of people here looked at it. so to give you a little bit of background, i'm from pennsylvania. i grew up about an hour east of here, about 45 minutes, 50 miles west of philadelphia in a little town. and when i was growing up, harrisburg was -- this was not a city that you came to. throughout elementary school and middle school a lot of times when you're kids, you go to the local capitol to learn about government, to learn about how the municipal processes work, to meet your legislatures.
we never did that when i was a kid. this was a city that you just avoided because of the crime and because of the blight. it wasn't a place that you would bring kids. so in september of 2010 when i came to harrisburg to work, i went from -- i got, i graduated from university of pittsburgh, got my master's at temple. i flew out to wyoming, i worked in wyoming for two years, i worked in madison, wisconsin, for three years, and then i moved back to harrisburg. and when i came back here, i couldn't believe what i saw. i saw a thriving city. again, this was in 2010, a year before the bankruptcy. that's how fast be this entire thing imploded. but i saw a thriving city. i saw a bunch of young professionals walking around. i saw new buildings, new high-rises, a bunch of new businesses, trendy shops. none of this was here when i was growing up 20 years earlier, none of it. i couldn't believe it. it was great for me to see.
i mean, pennsylvania's my home state. i wanted to see pennsylvania do well, i still do. i wanted to see harrisburg thrive, and it looked like it was thriving. now, when i got here, my news director had said to me that it looks like harrisburg is going through some financial issues. we don't know what those issues are yet, we don't know how bad it's going to be, but i had been a reporter in madison, wisconsin, which is another capital, and i had done a lot of capital reporting, and he said i need someone here just in case. so i said, okay. it was like a homecoming for me too. but nobody knew what was going to unfold over the next three years. and it was, it was something that i could never have predicted, and i don't think anybody could have ever have predicted what was really going to happen. and after four years and more than 200 reports on this city, i decided that i was going to write this book to try the teach
people what happened in harrisburg in the hopes that other places, other cities won't go down the same path. so this is a be picture of young steven reed. he's probably about early 30s here. this is soon after he became mayor of harrisburg. and you can tell it's the early '80s, the glasses and the haircut. [laughter] and he was ambitious. people loved him. he's a guy that when you meet him, he's a very friendly guy, very warm. the type of guy that in a group setting he can headache you feel like he's -- make you feel like he's having a one-on-one conversation with you. he's incredibly articulate, very nice guy, very nice smile, just a very warm way about him. and this picture -- oops, hold on. that picture is steven reed about the time that he left office. so you can see from here to there that those 28 years, they were rough on him. and it's also amazing to me to think that, i mean, 28 years is
most of his adulthood that he spent in one job in the public running a city. and this was a man that many people thought was going to end his political career in the white house. before he even became mayor of harrisburg, he had served three terms in the state legislature and had already been a county commissioner. by the time he was 32. a lot of people thought that his magic number was 84, 1984, the first or year that he could run for president. most people couldn't even understand why he would want to even be the mayor of harrisburg in 1982. so back on october 11th, back on the day the city council declared bankruptcy, i was in the room covering that city council meeting when harrisburg declared bankruptcy. and you really need to understand the scope of what was happening here.
harrisburg was falling at an incredible rate financially. they were no longer paying their bills. they were no longer paying their debtors. they were no longer paying their workers. they slashed a massive amount of government jobs, the police, the firemen. nobody knew where their next paycheck was going to come from. the city had tried all different types of way, selling tax liens, taking money owed to it early just to get enough money to pay its workers. and at this point it wasn't paying any of its debt. its general obligation debt, which is like the mortgage of a city that they use to buy fire trucks, police cars, it wasn't paying that debt. it went paying anything -- it wasn't paying anything. and wall street was really concerned, because wall street had hundreds of millions of dollars in debt that steven reed took out tied up in this city. wall street wanted its money. wall street didn't care if
police got cut and the crime rate spiked. wall street didn't care if firemen got laid off and they couldn't fight fires as well. wall street didn't care if taxes went up on the impoverished people of harrisburg. they didn't care if parking got more expensive. they didn't care if trash collections got more expensive. they didn't care what happened to the people of harrisburg, they wanted their hundreds of millions of dollars. and on that day, october 11, 2011, harrisburg city council said, no. you, you, wall street, you are just as responsible as steven reed was or city council was back then for all that money that was loaned to the city. you signed those papers too. why are we the only ones that need to be held responsible now? so they filed for bankruptcy. all of a sudden the media, the global media converges on to harrisburg. everybody was here. it makes national news.
al-jazeera's asking the question, is this the end of american capitalism? because you have a capital city that has now filed for bankruptcy. again, the first one ever. that's how significant of a moment this was. and wall street was worried. wall street didn't want this to happen. let's say harrisburg goes bankrupt. let's say harrisburg reorganizes its debt and wall street doesn't get a lot of its money back. what's that going to encourage other cities around america to do? they're going to look at that example, and they're going to say harrisburg reorganized its debt, harrisburg didn't have to pay all that money back, why should we? wall street was worried. the legislature stopped the bankruptcy. the legislature, that gets a lot of campaign funds from wall street, said you know what? i don't think we're going to allow this to happen. they threw out the bankruptcy. the judge threw it out as well. but the significance of what
city council tried to do, and just look at this from the perspective of harrisburg's city council, there's seven members. they're part-time public servants. they wouldn't call themselves politicians. they would call themselves public servants. they make $20,000 a year. they don't have staffs. many of them don't have college degrees. they're grandparents, they're people that have lived in the city their entire lives. they're people that just love harrisburg. and they were willing to wage a war against multibillion dollar banks, and they didn't have enough money to buy the bullets. but they were willing to take that on, because they saw that there should be shared pain here. it's not just the responsibility of the harrisburg taxpayer when these cities go bankrupt. it's the responsibility of everybody involved who was willing to headache those loans, give that -- to make those loans, give that money to the city. and harrisburg city council went
right after them. it was a remarkable moment. unfortunately, it didn't last all that long. now, one of the -- when i was looking at, when i really started looking at what happened to harrisburg when i got here and i saw that the city was starting to, the city was really starting to crumble financially, i kind of thought to myself, you know, how can this even happen? when i first moved here and my wife and i were looking at possible places to live, to rent or buy, every real estate agent that i would talk to, everybody that i would talk to said, listen, we just had mayor of nearly -- this mayor of nearly 30 years, he was phenomenal. but now we have this new person that has come in, we're not too sure how she's going to lead the city. we really wish that we had this old guy back. and these -- i heard all these
legends about how wonderful this guy was and how fantastic he ran the city. and, again, all these institutions that he was creating. but then i started looking at the numbers. now, harrisburg's a city of about $48 million in the general fund budget, $48 million. in one project, the incinerator -- harrisburg has a trash-to-steam incinerator that it used to burn trash and is make money -- that one project had about $350 million in debt. one project. in a city that has a $48 million general fund budge. that didn't make any sense to me. but yet everybody that i was talking to was saying how wonderful this man was, this mayor that we had and how wonderfully he ran the city. now, this -- i didn't understand it. how could you say he ran the city this wonderfully when you're bankrupt, and this one singular project has $350 million in debt?
so i started looking more into it, and i started to learn how he really ran the city. and that's when i started to figure out that this guy ran the city like a dictator. and like any other form of dictatorship whether it be a nation or whether it be a city, that form of government does not work, and harrisburg is just the latest example of that. and i started talking to people that were involved this city government, and they were all saying the same thing. you couldn't do anything in this city without steven reed's approval. and if you, if you went against steven reed, you were done. your business was done, your politics were done, your career in the city was done. and it was really difficult for me to understand that type of stranglehold that he had on the city. because i thought in america how can that happen? in america with a free and independent media, how can that possibly happen? and in an america where people are voting for the people that they want to lead their
government and you have all these first amendment rights, how could, how could a dictator happen? i didn't want to believe it. i didn't want to believe that one man could have that much power. and it wasn't until that i understood that he had that much power that i realized that it was necessarily important for me to write this book so other people can understand how you can acquire that much power. now, the main reason that harrisburg went bankrupt is because of what i just mentioned, the incinerator. and the incinerator was a trash-to-steam project that burned trash, and the city made money. well, the timeline goes like this, and this is the main reason that harrisburg went bankrupt. and it goes back to what i said before about steven reed having so much power and doing what he wanted to do that he kept taking financial risks. and he kept getting involved in these accounting tricks and these financial tricks. and the incinerator trick that he got involved in was the one that ultimately did the city in. and this should not have happened. so in the early 2000s, the epa
comes in, environmental protection agency, and says, listen, your incinerator is too dirty. shut it down. so the epa shut down the incinerator. and then steven reed had a decision to make. okay, what do i do now? they determined that it would take a $125 million loan to retrofit this incinerator to meet the epa standards and get it burning again. so the decision was do we take out this $125 million loan, do we retrofit this incinerator, or do we walk away from the project? now, this incinerator had already been a big problem for harrisburg. at the time it had around $95 million in debt already attached to it. so as a reporter who was commissioned to be more of an investigative reporter as i was looking into the city and what was happening to it financially, i went back to a 2003 meeting. the city council meeting where
city council voted for that $125 million to retrofit that project. i got the, i got the cd. there weren't dvds back then in 2003, and i had to listen to it. and what i heard was just simply mind blowing to me. there were about 35 people from the city that spoke at that city council meeting. all but two of them, 33 of the 35, was begging city council not to take out this money. they were saying the numbers don't add up. this is not going to be a successful project for the city. one man actually predicted bankruptcy. he said if you take out this $125 million loan, this city is going to go bankrupt. city council, at the end of that night, voted 6-1, nearly unanimously, in favor of that $125 million.
and ask as a reporter look -- and as a reporter looking at this that i was not jaded by steven reed or anything else because i'd gotten here in 2010 nine months after he left office, i wasn't jaded by steven reed's appeal. and to see that nearly, it was nearly unanimous that the people of harrisburg did not want this project, but their city council theory unanimously approved it. that didn't make any sense to me at all. now later, we find out, there was a few hundred thousand dollars offered to city council perhaps in, you know, in exchange for those votes. there was a million dollars that exchanged hands to somebody who was involved in the project under the auspices of you will deliver the votes. that may possibly have something to do with it. that's how steven reeled ran the
city. so to make a fairly long story short about this incinerator that lasted over 15 years, they paid this $125 million out, they hire a, they hire a company to do the retrofit that was significantly below the next highest bid. it was probably like a third of what the next highest bid would be to retrofit that facility. he comes in, he goes bankrupt. the developer goes bankrupt as he's retrofitting the facility. and then city council just takes out more money. steven reed just takes out tens of millions of dollars more to hire another, another person to come in and then finish that facility. all the while the numbers surrounding the facility just didn't add up. excuse me. and that's how you get, that's
how you get $350 million in debt on one project when a city has a general fund budget of $48 million. so then i started looking a little bit more into it, and it turns out that it's not just as simple as the city taking out money to retrofit this facility. there were two things that had to happen on this facility, on that incinerator. it had to have a performance bond, and a performance bond is an insurance policy. and it's supposed to be in there, by law, state of pennsylvania, to protect the taxpayer in the event that something goes wrong in the commission of that project. the first, the first proposal to the state had a performance bond. the one that ended up getting approved did not have a performance bond. not to cover the entire project. the other aspect that's significant is harrisburg had hit its debt limit. in the state of pennsylvania, like many other states, they have a limit for how much money a municipality can take out.
again, designed to protect the taxpayer. harrisburg had reached that limit. harrisburg was there. the only way that harrisburg could take money out, additional money on this project, were if the loans were deemed self-liquidating. and what that means is the money taken out to retrofit the facility would be paid for by the facility in new revenues because of that retrofit. so in essence, the project would pay for itself. that is state law. it wasn't self-liquidating, clearly. because it drove the city into bankruptcy. so then you start asking the questions how did it get -- it had the certifications. how did it get these certifications? it was certified at the county, the state approved it. how did all of that even happen?
and that goes back to what happened shortly after this book came out that we're going to get to in just a little bit. so the main reason that city council was fighting with what happened to harrisburg and the reason that they wanted bankruptcy was because when these bonds on the incinerator were issued, as i said before, the way that he would get money is he would issue bonds, and he would scrape money off those bonds that he would then use to reinvest into the city with the museums and artifacts and other things that he was trying to do. so when these bonds for the incinerator were issued, $16 million in fees were paid out. now, this is not money that goes to the city, this is not money that goes to the project. this is money that goes to the professionals. this is money that goes to wall street. this is money that a goes to the accountants, the lawyers, the bankers. i think $2.5 million went to the city that steven reed got, i
think it was $2 million also went to the county. $16 million. all this money got paid out. and that's what city council was saying. what is wall street's incentive not to loan municipalities drastic amounts of money when they're getting $16 million just on a small city? think about it. harrisburg only has 49,000 people, and they're making $16 million in fees on one project. imagine what those numbers are in philly. imagine what those numbers are in pittsburgh, in l.a. and chicago. what is the incentive of wall street not to loan this money? especially when a city like harrisburg wasn't allowed to complete the bankruptcy filing because the state threw it out? what's the moral hazard here for wall street? why would they not loan that money? it doesn't matter if the city can even pay it back. we're going to get our money, and then if the city goes bankrupt, it's not that big of a deal. they're going to raise taxes,
they're going to cut fire, but we're going to get our money. so city council was saying, no, that's not how it should work. you should all be held accountable for what's going on here. it's very similar to what happened in the housing collapse in 2008. people were being loaned money to buy houses that they never should have been loaned. harrisburg was loaned money by wall street that it never should have been loaned. it's a very similar concept. now, in the housing crash there were some big financial firms that, you know, they paid the price for that. but what price was wall street going to pay for doing this to harrisburg? so are we setting a precedent in america where if certain things happen to individuals, that you can pay a price? but if you do something to a city, perhaps you don't pay that price? even though eventually it's going to affect the individuals
of that city, the taxpayers of that city? and when this situation happened in harrisburg, the people of this city suffered. the city crime rate spiked. this 2012 harrisburg became the 20th most dangerous city in america. the 20th most dangerous city in this country. little harrisburg. 49,000 people. the city didn't have money to repair potholes. the city didn't have is money to repair streetlights. the city didn't have the money to do the things it needed to do to keep the quality of life high for the people that were living in this city. there were sinkholes that were opening up. i covered a story with a woman who on january 1st there was a giant sinkhole, actually, three giant sinkholes that opened not far from here. and when those sinkholes opened, all the utilities were cut off for the people that lived there, and the people had to evacuate. so i went there when the sinkholes opened on january 1st, a bitterly cold day, so cold the
susquehanna was freezing at that point which it doesn't do often, but it does occasionally. and when i was at the sinkhole, i noticed there was a red light in someone's house, so i went and knocked on the door, and a woman answered. she had seven kids, single mom. she refused to go to a shelter. i'm not going to a shelter. i'm not taking my babies to a shelter. i can't trust the people there. this is a woman who had no i yahoo! tilts -- utilities. she had electric, that was the only one, because the electric lines were up top. everything below, water, sewer, all the other things were cut off. and she was still live anything that house. living in that house. how is that right? people like her, the people that created the problem that she is now having to deal with, those people were never held accountable. the school district in the city, the school district was dealing with the same problems because as people were leaving the city
when the financial collapse was happening, they didn't have the money to run the school district. they wanted to cut all sports in the harrisburg school district. i mean, i know how important sports were to me when i was growing up, and i had to go to the school board meeting where the kids were pleading and the parents were pleading, don't cut our sports. but the city didn't have any money. and, again, the people that did this to the city, the people that loaned the money to the city, the people that took the loans, steven reed, these people were not being held accountable. and it was infuriating to me. because i was the one talking to the people who was suffering -- who were suffering. i was the one looking into their eyes, seeing what they were going through. and at the same time, i would see the people in their foreign sports sedans drive out of harrisburg every day at 4:30 and go to their suburbs and leave behind this broken, broken city that they were responsible for
creating. it was absolutely maddening. and then the people of harrisburg were getting mad at the media. they were getting mad at us, and they were saying why don't you ever cover anything that's good? and, you know, my definition of news has always been news is the absence of normalcy. and as soon as bankruptcy of a city becomes normal and people helping other people is no longer normal, i think that's when our society is in trouble. but the people of the city weren't necessarily getting had at those responsible for their plight. they were getting mad at the media because we were the ones that were reporting it almost every single day. so inevitably what happened was after the state says to harrisburg, no, you can't file for bankruptcy and that gets thrown out, the state decides, know what we're going to do? we're just going to take you over. so in addition to harrisburg being the first ask only capital city in american history to file for bankruptcy, it then became the first to be taken over by a
state. so the state comes in, takes over, appoints receivers. a receiver was the fancy word for the person controlling the city. strips the elected leaders of their constitutional right to run the city which then stripped the people of harrisburg from their constitutional right to elect the leaders they want to be running their city -- created a massive constitutional issue. it also created a racial issue in the city because now you have a 75% minority democrat city, and it was imposed upon them by an old white republican governor who hires an old white republican former wall street banker to take over the city. so there's constitutional issues, there were racial issues involved in this. so in the end, the city imposes upon harrisburg a financial recovery plan. the city had its assets stolen -- i'm sorry -- sold. so the state comes in, the state
sells the city's assets. a bunch of other things happen. we don't know if it's going to work, it's too soon to tell. it won't be until 2016 or 2017 until we really find out if this state-imposed recovery plan on harrisburg is going to work. but i'll tell you this, harrisburg has already become historically significant in america because of the bankruptcy. and we can look at harrisburg, and we can find out, and we can learn what not to do. if this financial recovery plan does actually work in two or three years when we look back on this if it does actually work, then we can also look to harrisburg as what to do when you have a financial crisis. but we don't necessarily know if that's going to happen yet. so what can we learn from harrisburg? i think there's a couple things that we can learn which is why i wrote "capital murder." the first is the news media needs to be responsible and hold
the people in power accountable. they need to be doing their jobs, they need to make sure that the people that are controlling tax dollars and the people that are making the laws that we live by are doing it the right way. the news media in harrisburg did not do that for a number of reasons. i have a few of the reasons in the book. the other thing is the people of harrisburg. i know what they -- i understand the idea. harrisburg was in a bad place in the '80. this man comes in, he revitalizes it, it becomes a wonderful city. let's keep him this office. we don't have to watch what he's doirntion he can really -- doing, he can really do whatever he wants. people of america need to learn that is not the proper way to run a democracy. and harrisburg is the perfect example of that. here's the update. the update is shortly after it
came out just a couple months, steven reed was charged with 499 counts from are a jury. he was indicted. and these counts include racketeering, running corrupt organizations, theft. there's a lot involved in this. and the reason that i wrote this book was because i felt that harrisburg, pennsylvania, was financially killed, but nobody was held responsible for it. and i think it was three months after this book came out that he was charged, and he was held responsible for it. which is significant not only to central pennsylvania, not only to pennsylvania or -- but also to america, because it's showing that, yeah, you just can't do whatever you want. and you're going to be looked at, and you're going to be held accountable. but more significantly, after he was charged the attorney general of pennsylvania said she is also looking at the lawyers, the accountants, the consultants. she's looking at wall street.
because much like what city council said when they declared bankruptcy, we are all guilty of what this city went through. and you at wall street -- which ended up because of the recovery plan, they got paid in full. wall street got all of its money back. the bond insurer took about $100 million hit, but the original issuances of those bonds, they got all of their money back which again begs the question why would they not just do it all over again? what's the disincentive for them not to loan that money all over again? but she said we are going to look at them. we're going to look at wall street. and if we can prove that they did something wrong, then we're going to charge wall street. she said steven reed did not do this alone. he was the first person to get charged because he was the figurehead. he was the mayor for life. he was the best mayor in america. he was the first. but there's going to be more to follow him, she said. also the governor of pennsylvania has said that he is going to look after -- or go
after wall street, the attorneys, the bankers, the accountants civilly to see if the state can get those fees back for harrisburg. so harrisburg can then have that money. again, because these loans on the incinerator should not, should not have been issued. and that is a significant step for america. because if our cities can be rest assured that wall street will be held accountable for loaning money that ends up bankrupting our cities and then putting great hardship on their residents, it may save cities in the future because wall street won't loan the money. wall street won't just look at it as we loan the money, we get fees if anything bad happens, who cares? that's the significance. that is the historical significance of harrisburg now. it was once, 150 years ago, it
was the center of america. and the historical significance that it has now is that what happened in the city could end up saving other cities from a very similar fate. i thank you guys for coming so much. i appreciate it on this beautiful day. if anybody has any questions, i'll be more than happy to take them. >> i have a microphone here. if someone has questions, we can pass it around. >> maybe this is a question that you can't answer, but it's so obvious. why, what were the lenders and the insurers thinking? because they had to have been the people who were looking at the football -- the financial numbers, and why did they just let this debt continue and continue? wasn't there someone above and beyond those getting fees who was looking at the numbers saying this debt is just too incredible? >> sure. >> maybe there's another book. how did wall street and the
bankers and bond insurers, how did they let this happen? >> well, in the book i mention, i mention the $16 million that we talked about earlier, who it went to. royal bank of canada, it went to a lot of, a lot of bankers and a lot of lawyers that you may know their namings. municipal bond market is very small. there's only so many institutions that really get involved with it. and that's why it's such a significant issue thousand for america with these civil and criminal charges, because it's largely the same organizations that are loaning to all the different municipalities in america. it's small. it's just not really big. now, i can't get into their minds, but what i know is if these bonds don't get issued, they don't get paid. so what is the incentive not to issue the bond? and then you go back to the idea that, well,ing even after harrisburg -- even after harrisburg's remarkable financial collapse, wall street still got all of its money back.
yeah, the taxes in harrisburg are higher, people are paying more for trash, they're paying more for water, and there's fewer policemen, there's fewer firemen. but wall street got paid. they got all their money back. so i don't understand what the disincentive is anymore or ever was for wall street not to just continue loaning money. that's why these civil and criminal charges that the attorney general and the governor are looking at are so remarkably important. because if there are more harrisburgs and instead of it being a city of 49,000 that goes bankrupt it's a city of two million, this is going to be a very different situation. or if it's a number of cities, relatively smaller cities like harrisburg that start going bankrupt because you have a mayor who's willing to take this money and wall street willing to give it, it's a significant issue for america. >> thank you. were there lost opportunities to
declare the emperor has no clothes against such a cult of personality? as you just shared, he was a personality, a very weighty personality. >> he was a very strong personality. i don't think that anybody wanted to take him on because nobody wanted to stop the progress. you didn't want to be that person in the media who reported on steven reeled, and the harrisburg -- reed, and the harrisburg hilton didn't get built as a result. people in harrisburg were desperate for progress. people in harrisburg craved the progress. and when it started coming and people saw him doing things, nobody wanted to get in the way. the media got in the way, challengers to him politically got in the way. in the book i talk about two instances where people did challenge him, two instances. one had to deal with him bringing the harrisburg senators to the city. the way that he brought the harrisburg senators to the city got challenged. it went to court. a judge looked at the
information, and a judge said, you know what? you actually abused your power maize your in bringing them to this -- abused your power in bringing them to this city. there was no punishment against him. but that just allowed him to do more and more things, because he knew that if i just get the team here, i can do whatever i want. i get the team here, they're playing, they're going to be here for good. so the judge actually said in his ruling, well, the team's already playing, so i guess i'll just let you go. and there was another instance where he was challenged, and it had to deal with him moving this money around, these fees. they were called the harrisburg 13. and they took him to court. and the judge in that case also agreed and said, yes, you abused your authority as mayor in shifting this money around, the money that was from bond issuances and just doing whatever you want with it. but the judge in his ruling said i think that you had the best
interest of harrisburg at heart, so i'm not going to punish you. it was systemic. the judges wouldn't hold him accountable, the media wouldn't hold him accountable, the people just let him do whatever he wanted, and he drove the city into bankruptcy. and that, it's really even hard for me to understand if i stand here now how someone can hold that much power. but i give example of example after example of how he did this. and the guy's brilliant. the guy is absolutely brilliant, how he went about this. and the other bring brilliant is that -- thing brilliant is that it lasted 28 years. he was doing these 28 years and then nine months after -- about a year after he leaves office, the city files for bankruptcy. the guy was able to hold it together. and now he might be going to jail, but time will tell on that one. any other questions? >> you mentioned the first
receiver in your comments. i believe you were referring to mr.-- [inaudible] >> correct. >> -- and referred to him as a wall street banker and almost as though that made him somewhat complicit in this. in the aftermath, frankly, if i recall correctly he walked off the job, resigned as receiver and in doing so head some statements to the effect -- made some statements to the effect that there were political forces hindering his performance in his job. and i think also made some statements about some irregularities or even illegalities that he encountered? i'm just curious, did you interview him for your book, or do you have any idea whether he testified to the grand jury or may, his knowledge may play some later role in the outcome of all this? >> i didn't, i did not interview him for the book because i had interviewed him a number of times when he was receiver. and when he first came into harrisburg and he was appointed by the governor to run the city,
people were really skeptical. because now all of a sudden the elected leaders of harrisburg no longer have power over their city. this guy who worked for wall street was. and wall street was the people trying to get all of their money back. they were the people saying, oh, no, no, no. we need 100% of our money, and this guy had worked for wall street. so i was very skeptical. and as a reporter, i shouldn't say this but i put it in the book, so i'll say it anyway, but he won me over. i thought he was the right person to lead this city out of bankruptcy. and i was only further in that belief when he quit, because he said when he finally realized what happened and he saw how bonds were being issued, how the city was being run are, how wall street was -- run, how wall street was come licit, he said i cannot ethically do this job anymore. and he quit, and he called for an investigation. he said this needs to be looked at criminally. now, when he quit, i think he hurt the city.
but the city wasn't going to be hurt any more than it already was. it didn't have anything. it already wasn't paying anybody any bills. so by him leaving, it just prolonged the suffering, if you will. but i respected him when he said i can't do this. i know too much now. the people that did this need to be investigated, and the people of harrisburg need to have justice. i just want to say one thing here. justice, to me, does not mean that steven reed goes to jail. i mean, justice to me doesn't even necessarily mean that wall street has to pay back the money or wall street, if they're held criminally or civilly liable, that's not justice to me. justice to me is the people of harrisburg need to find out. they need to learn is and they need to know, okay, what bankrupted our city. was it really just a bunch of really bad financial decisions over a prolonged period of time, or was it because there were criminals that were running the city both in wall street and also in harrisburg?
to me, that's justice. we need to know. we don't know yet. but i think we will. we will find out. any other questions? well, thank you so much for coming. i really appreciate it. [applause] >> i'd like to thank chris for coming this evening -- this afternoon and providing us with his interpretations and his insights. having spent time in chicago in the early 1970s with mayor daley, i'm thinking we've moved to a new location, but the same story is applying. thank you for our guests to come here and listen and enjoy our lunch hour events. we hope to have more in the future, and thank you. [applause]