These days, I have garbage and economic cartels on my mind. And Wall Street, of course.
In New York, the Department of Sanitation picks up residential garbage, but commercial waste is disposed of by private carters. In the 1950s, the Department still picked up commercial waste on residential streets, i.e. streets that mixed apartments and businesses, but they discontinued that policy which opened up a vast market for private carters. The Mob saw a great opportunity and moved in with force.
Until the late 1990s, the Mob controlled the collection and disposal of commercial waste with a cartel that all businesses were required to join. Refusal was not a viable option. It was, as they said, “A beautiful thing.” Recalcitrant trash haulers were intimidated, firebombed, or beaten to a pulp. Members of the club charged businesses exorbitant rates: three, four, five, ten times what the cost would be in a market with competitive bids. If any business protested, mom and pop grocer or Fortune Five Hundred multi-national, the answer was the same: “Pay up! Who youse gonna call?”
If a carter got out of line and actually submitted a bid for service that was below the cartel price, the Mob came down hard. If the carter actually won the job, taking the “stop” from a cartel member, howls of protest were heard: “He stole my stop!” Restitution would be paid, or the stop would be forfeited. The heavies in the cartel would try to set the rebel straight. Submitting low bids did nobody any good. It only ‘educated’ the customer that the price structure was simple gouging. “And when that happens, who wins? The customer wins” Can’t have that! It was the American way. As the gangsters liked to say, “Hey, it’s a free country!”
I learned all this from a book called Takedown: The Fall of the Last Mafia Empire. It’s an in-depth recounting of a three-year NYC undercover operation that resulted in the complete destruction of the mob cartel. It began by chance, when a detective interviewed an honest carter who just wouldn’t knuckle under: some thugs walked in and asked who he was. The carter, thinking fast, and knowing that being caught talking to a cop was a death sentence, said “That’s my cousin Danny.” Thus was Rick Cowan, Irish NYC detective transformed into Danny Benedetto, member of a large Italian-American family that had been in the wastepaper business for generation. He carried a wire and worked himself into the cartel for years, living a double life that I cannot imagine. As Danny, he paid enormous amounts of extortion to the Mob, and got it all recorded. The principals, among the Alphonse “Allie Shades” Malangone at the top, were convicted, fined, imprisoned, and debarred from the industry in perpetuity.
Reading this book, I reflected on the similarities between the mob cartel and the wall street cartel. They both have beautiful things going. Wall Street buys the politicians, makes the rules, comes up with derivatives that serve no purpose other than to generate massive fees, produces junk mortgages, and it’s all legal. Transparency is anathema them all. But what really got me, was a certain catch phrase. When a cartel member was bumped from an account by an honest low bid, the cry was, you have to make me whole! That is, pay me extortion to compensate me for loosing my good deal. I thought I heard that during the Bear-Stearns debacle.
“In this room are people who have built this firm and lost a lot, our fortunes,” one Bear executive said to Mr. Dimon with anger in his voice. “What will you do to make us whole?”
After the takedown, prices for commercial waste collection in NYC fell by 40%, and in some cases much more. The service vacuum left by the exit of the mob outfits was filled by big companies coming in, and they promptly began to raise their prices. As a friend of mine who is an expert said on an NPR production about the topic a few years ago, prices are nearly back where they were under the cartel. And the carter who started it all remarked, “The only difference between the Majors and the Boys is that the Majors won’t really kill you.” Well…that’s a pretty big difference even so.
This is an excellent book to read if you want to know what the Mob is really like.