“I had two basic points that I was looking to fulfill--someone who was ready to be governor of the State of New York if I was incapacitated from the position, and someone who reflects the values and qualities that I want to bring to state government,” Cuomo said. “Rochester Mayor Robert Duffy is that person."

Duffy’s experience as mayor was a tipping point in Cuomo’s decision.

“When you are a mayor, you are on the front line and your performance or lack thereof is very obvious,” Cuomo said.  “And Bob, as mayor of Rochester, has shown his performance over and over and over again.”

The pair say they stand united on several key issues—public integrity, personal standards, reducing taxes and economic development.

“[Mayor Duffy] has done in Rochester what we need to do in New York State,” Cuomo said, referring to the long line of scandals that have plagued Albany in recent months, not to mention the massive budget problems. “Get our fiscal house in order, consolidate government, focus on economic development and bring 100 percent integrity and honor back to government. There’s much to do to turn around New York.”

Rochester, Duffy said, can be viewed as a microcosm of the challenges that the state faces as a whole.

“As a mayor for the last four-plus years, I’ve seen firsthand the failures that we’ve seen in the state,” he said.  He counts increased taxes, a dwindling population and a faltering economy among those failures.

Duffy, who accepted the position Tuesday, is a former Rochester police officer.

He graduated from the Aquinas Institute, Monroe Community College, and the Rochester Institute of Technology, and earned a master’s degree from Syracuse University.

The lieutenant governor hopeful was elected mayor of Rochester in 2005 and re-elected in an unopposed race four years later. He's been married to his wife, Barbara, for 25 years. The couple have two children, Erin, 23, and Shannon, 21.

When it comes to his Cuomo, Duffy said he feels personally aligned with Cuomo’s philosophies.

“I believe in this man,” Duffy said. “This is not something I am just saying. This is not a political speech. This is not campaign talk. I believe in what he stands for, I believe in what he’s going to do.”

Despite the fact that Cuomo has created an all-white Democratic ticket in a state where nonwhite voters make up nearly a third of constituents, he maintained that diversity remains among his administration’s priorities. (He also called Al Sharpton to say so.)

“We strive for diversity everywhere,” he said. “My administration will be an administration that reflects diversity. Can you always get all the diversity you want when you want it? No.”

Cuomo also addressed state Democrat's attempted "rebranding" of the party.

“I don’t know that there’s a rebranding,” he said. “What the Democratic Party is all about is growth and change and evolution. And it is a new day and these are new problems and new approaches, and that is what they mean by the ‘new’ Democratic Party.”

Albany has yet to agree on a budget for the new fiscal year—the budget was due on April Fool’s Day. The city could face sharp reductions in state aid when Albany gets around to passing its spending plan, leaving Mr. Bloomberg with little choice but to patch a $5 billion deficit with layoffs and service reductions—he wisely chose not to raise taxes on a citizenry that already is burdened with every tax imaginable.

Some 6,700 public-school teachers may be laid off, along with 400 firefighters. The cuts in school spending come at a time when the city actually needs more (and better) teachers, as Schools Chancellor Joel Klein has pointed out.

Albany’s dysfunction has a trickle-down effect on every neighborhood in New York City. What a shame that Governor Paterson and his aides have decided to ignore the presence of their hand-picked lieutenant governor, Richard Ravitch, an effective mediator and problem-solver who has been relegated to the sidelines amid all the bickering and posturing in the capital.

Mr. Paterson showed a flash of steel in ramming though an emergency spending plan this week that calls for furloughs of 100,000 state workers. He ought to build on that accomplishment by brainstorming with Mr. Ravitch and demanding that legislative leaders get serious about delivering a budget—now. Every city and every county in New York is suffering because of Albany’s broken system of governance. This simply has to stop.

Pundits and political observers who routinely describe New York as little more than an ATM machine for national candidates clearly have overlooked another source of New York’s power—the power of ideas, expressed by talented women who grew up in a city that nurtured their creativity and ambition.

President Obama’s nomination of Elena Kagan has been interpreted as another victory for women in government and politics.

And so it is—if confirmed, Ms. Kagan will be the third woman on the nation’s highest court. That’s never happened before.
She also would be the third New York woman on the court. Ms. Kagan was brought up on the Upper West Side and educated at Hunter College High School. If confirmed, she would join fellow New Yorkers Sonia Sotomayor, a native of the Bronx, and Ruth Bader Ginsburg, who was born in Brooklyn. (A fourth justice, Antonin Scalia, moved to New York with his family when he was 6 years old. Of course, he shares very little with his current and would-be female colleagues, except for their connection to New York City.)

The conspicuous presence of three New York women on the high court surely is no accident. Here, young women are encouraged to develop their talents and pursue their ambitions, and they are rewarded when they succeed. That is not to say that every glass ceiling in the office buildings of Manhattan, the brownstones of Brooklyn and the Cape Cods of Staten Island has been shattered. But the success of women like Elena Kagan (and so many others, in so many other fields) surely says something positive about New York’s families, schools and neighborhoods.

New York may no longer be the home of would-be presidents. But as the nation’s hothouse for ideas and innovation, its influence over public policy remains as strong as ever, thanks to the brains and talent of New York women.

There are no more residential holdouts on the 22-acre site, and the project’s opponents have lost one of their key allies in their long and loud opposition to Mr. Ratner’s project. The $4.9 billion plan should now move forward after languishing for far too long.

Mr. Ratner already has begun construction of a new basketball arena, the future home of the New Jersey Nets. But his plan to build as many as 6,000 apartments—30 percent of which are designed for moderate-income tenants—has stalled while opponents like Mr. Goldstein have stood in the way, insisting that Mr. Ratner’s plan was too ambitious. 
It surely is ambitious, and not least because Mr. Ratner has set aside so many apartments for people of modest means, at least by New York standards Mr. Ratner has tried to do the right thing, as some tenant advocates have acknowledged. But in some circles in New York, it is a capital crime to speak well of a real estate developer or to suggest that a new project might be good for any given neighborhood.

Mr. Ratner has persevered, to his credit. Downtown Brooklyn will be a better place when the Atlantic Yards project is finished. If there is any justice, Mr. Ratner’s critics will concede the point when the time comes.

Last week, City Hall unveiled an ambitious proposal to turn a portion of 34th Street from Fifth to Sixth avenues into a car-free zone. Traffic flow would change radically at either end of the mall, with cars routed one way only—toward the East River east of Fifth Avenue, and toward the Hudson River west of Sixth Avenue. Buses would run river to river in special bus lanes.

That’s an ambitious and potentially problematic proposal. City Hall has to demonstrate that traffic somehow will get better, not worse, in an area that already is terribly congested. But wait, there’s more! City Hall also wants to tinker with Union Square Park, which already is pedestrian friendly, especially along the park’s western edge. City Hall wants to block most vehicles from Broadway between 17th and 18th streets, just north of Union Square, and plans to turn 17th Street along the park’s northern edge into a pedestrian mall.

The Department of Transportation will “study” the proposal, as will local community boards, but there’s a sense that the fix is in. City officials say they hope the changes will be made by Labor Day.

That sounds like a rush to judgment. This proposal needs careful, objective scrutiny, not from cheerleaders but from traffic engineers and urban planners who can anticipate problems in both the near and long term. Even City Hall had to concede that the pedestrian mall in Times Square has not improved traffic flow to any significant degree, although that’s what the city promised when it created the mall last year. And the change that converted the Park Avenue tunnel to one-way traffic also hasn’t lived up to expectations.

Any great city needs great public spaces—Manhattan has some of the greatest such spaces in the world. There’s no reason, then, to ram through these proposals without careful thought. Pedestrians who want to enjoy open space have plenty of choices, as any visitor to Bryant Park or to Union Square will attest.

This issue should be studied, not rubber-stamped.

The Observer: Did the S.E.C. bring this case just to make up for all its past fuck-ups? There have been rumors the Obama administration said that if regulators were going to do this, they had to go after Goldman.

Mr. Zuckerman: I’m not a Goldman conspiracy theorist. And it’s a very complicated issue, so it takes a long time to prove. That said, they did start working on this in early 2008. By the end of 2008, they were grilling Paolo Pellegrini, the architect of these deals, who worked for John Paulson. It does come at a curious time, when there’s the financial reform bill in Washington, and the same day the S.E.C. was criticized for making mistake after mistake. I like to just think it took them a while to make the case.

Are other banks going to be charged? They all did similar things, either for Paulson or other hedge funds.

Well, there are reasons to think that this is a little bit of an easier case for the government to bring because you have this third party, ACA, which makes it more unique, and you can argue misrepresentation. But in other ways there are other similar deals done by other investment banks that I would argue are more egregious. So yeah, you’ve got to figure the government and lawyers are poring over those other deals right now. And, you know, Paulson went to all the other banks, and a lot of them agreed to do this for him. So there’s definitely going to be scrutiny of other deals done either for John Paulson or other hedge funds.

There’s a part of your book where Paulson has pitched this to a bunch of banks, and someone at Bear Stearns said he wouldn’t do it because selling deals that someone was shorting on the other side ‘didn’t stand up to Bear’s moral compass or ethics standards.’ Bear Stearns. Ethics standards. I just need you to comment on that.
There’s a lot of irony there, for sure. I think it also speaks to the fact that there was a lot of gray area in these deals, that some banks thought it was perfectly fine and some didn’t. Some people thought I should’ve taken a bigger stand on the investment bankers or John Paulson, but, you know, the way I looked at it was that I’m sort of old-school journalism and I don’t believe in taking a stand. The readers are smart enough to come to their own conclusion. Some read it and find blame in Paulson or the banks and some find no blame, and either is fine. It’s for them to judge.

Even though he hasn’t been charged with anything, a lot of people are coming down on Paulson, saying what he did was amoral and whatnot. Shouldn’t we be giving him kudos? Wasn’t he just coming up with an awesome trade and killing it for his clients?
The argument against John Paulson is that because of his efforts, there were several billion dollars in toxic product created that eventually hurt global banks, and that it was at his instigation. But what also needs to be kept in mind is that he never sold any of this product to investors, and it’s not his job to worry about who is on the other side of his transaction. They all knew the collateral behind these deals, they all could analyze it, and you have to remember that at the time, Paulson wasn’t the name he was today. Taking the other side of a deal that was created in part by John Paulson and his team seemed like a good proposition at that time.

So do you think even if Goldman had disclosed what the S.E.C. says it should have, regarding Paulson’s role, the investors would’ve made the same decision on it?
Yeah, I don’t think many investors would have had a second thought about taking the other side of a trade of John Paulson’s back in 2006 or early 2007. He was seen as a tourist investor dabbling in real estate, and some people thought he was out of his league—even Goldman Sachs thought he was out of his league. Josh Birnbaum, a top trader at Goldman, sat across from Paulson in his office and warned him about what he was doing.

Goldman is all about—or saying it’s all about—the clients being number one, and now because of all this, people, investors, are questioning that commitment. But Paulson was a Goldman client. So they were still working in one client’s best interest. Sometimes you have to play favorites, right?
Yeah, I mean, you could argue that if John Paulson had lost a billion dollars on this deal, that he should have complained that he’s a client of Goldman Sachs, and he wasn’t warned that a sophisticated, huge German bank which does credit analysis on a daily basis was on the other side of his transaction.

What do you think of the defense that the losers should’ve known better, done their due diligence and known what they were getting into?
Yeah, I mean, these things were not being sold to mom-and-pop investors. They were going to sophisticated investors, who should have and could have done their homework. As for the argument that Goldman should have told the investors about Paulson’s role in putting it together, it’s interesting; we’ll see what happens. They don’t have to be told who is on the other side, but the government thinks you can’t tell people ACA put this together when John Paulson had a hand in it.

There have been reports detailing the fact that top Goldman execs, including president Gary Cohn, began increasing their oversight of the firm’s mortgage unit at the end of 2006, that they were on the trading floor, that this went all the way to the top. Do you think they knew exactly what was going on? Do you think Lloyd Blankfein knew about this stuff?
It was clearly well known within the firm that they were working on these kinds of deals—senior people knew a lot of details about them, and knew that Paulson had a hand in putting them together. The question is whether more senior people knew how they were being marketed. And I tend to doubt they did. And that’s sort of why they’re focusing on this one guy, Fabrice Tourre.

So you don’t think Mr. Fantabulous is being made a fall guy? How is it possible that he’s the only one that did anything wrong?
I don’t know. I mean, it’s the government that’s the one just charging him personally, so I’m not sure it’s Goldman throwing him under the bus.
A bunch of people have said that Lloyd Blankfein won’t survive this, including analyst Dick Bove. But he’s also made bold claims like ‘Ken Lewis is a brilliant visionary and tactician.’ Do you think Lloyd could actually get canned over this?
I have to say, all indications are they really believe and are confident it will be proved they did nothing wrong. You talk to them off the record, and they really don’t think they did anything wrong. So knowing that, I can’t see them getting rid of Blankfein.

So is Goldman going to be fine, a couple months of bad press but nothing long term?
I’m not sure about long term. It’s definitely a black eye. I can’t tell you how many people have emailed me and talked to me about their anger at Wall Street. Goldman symbolizes that for them. It’s definitely a big PR black eye and that could last a while.

What is the impact of this case going to be on financial reform? Is it unfair that hedge funds—who weren’t really responsible for the mess we got into, since they just made the trades—are going to pay for it in regulations?
It’s remarkable. And the repercussions are going to be huge, and there will definitely be more scrutiny on hedge funds, not all of it warranted.

Paulson hated your book when it came out. Do you know why?
At the time, I thought it was because I dug into his past. He was a playboy, he got married later, he enjoyed himself and I thought maybe he didn’t like me writing about that. But now I do wonder whether or not he disliked it because he thought that shedding light on what was going on would create the perception he did something wrong, or make him look bad. Which is actually pretty impressive that he had a sense something big was going to come out of all this.

Bess Levin is editor of DealBreaker.com.

If Goldman is guilty as charged, it should be punished. Those in the financial industry who broke laws and regulations during the boom should be prosecuted and punished. But it would be wrong to condemn the entire financial services sector because of the wrongdoing of a few miscreants, even if they happen to take the form of enormous investment banks.

From the steps of the Capitol in Washington to the steps of City Hall, there are full-throated cries for massive new regulation and draconian punishment for an industry that, quite simply, drives the entire tristate economy. The well-being of millions depends on the financial health of Wall Street and its products. And it is important to remember that those millions include not just highly paid brokers and executives but lots of solid middle-class and working-class jobs as well.

Punish the guilty, for sure, even if they happen to be Wall Street’s standard-bearer. But punish only the guilty.

The so-called rubber rooms were not necessarily a case of union protections run amok, although that’s how they were presented in some media outlets. The United Federation of Teachers certainly has been aggressive in defending tenured teachers who have been removed from classrooms for an array of alleged offenses, including incompetence. The other side of the story, however, involves management: Schools Chancellor Joel Klein implicitly conceded that the process of investigating cases against individual teachers has been anything but timely. Some teachers spend months—even entire academic years—in rubber rooms before the city gets around to holding a hearing about their cases.

Teachers have rights just like anybody else, and an accusation of incompetence or unprofessional behavior is just that—an accusation, nothing more. So they are entitled to legal protections. But the new agreement between the UFT and City Hall ensures that they will be put to work on administrative duties rather than spend hours upon hours, days upon days, doing nothing.

The accord on rubber rooms should be followed up with more common-sense reforms. Manhattan Assemblyman Jonathan Bing has introduced a measure in Albany that would allow the city to lay off teachers without regard to seniority. Layoffs are, of course, a last-ditch measure that no politician wishes to implement. But if they are necessary, they ought to be carried out on the basis of merit, or lack thereof, rather than simply on seniority. “Last in, first out” is no way to run a business—or a school system. Mediocre teachers with seniority ought to be dismissed ahead of promising young teachers.

And speaking of merit, it is time the teachers’ union dropped its opposition to merit pay for its members. Excellent teachers—those with glowing evaluations, those whose students show improvement in standardized test scores—ought to be rewarded for their talent and effort. The UFT bosses have insisted for far too long that, in essence, all teachers are excellent. Sorry, folks, but the facts and common sense suggest otherwise. Not all teachers, save perhaps those in Garrison Keillor’s Lake Woebegone, are above average. Some excel, others go through the motions. They should not draw equal pay.

To advocate for merit pay is to advocate for excellent teachers. It’s time the union got on board.

Mayor Bloomberg, then, and not the governor, will take charge of plans to turn the 172-acre site into a destination for tourists and city residents alike. The city’s deal with the state calls for building an 87-acre park on the island, restoration of some of the island’s wonderful architecture, construction of a new high school and development of commercial sites. The mayor’s record suggests that this will get done, and will get done well, without breaking the city’s budget. 

Hundreds of thousands of residents and tourists already are using Governor’s Island as a day-trip destination that’s removed from the bustle of downtown Manhattan and yet only a few minutes away from the Battery via ferry. If the island in its present condition—with some buildings in severe disrepair and other assets in need of overhaul—can attract that many people, imagine the possibilities when (not if) the mayor’s plan comes to fruition. 

The federal government turned over the island to New York more than a decade ago, when President Bill Clinton struck a deal with Senator Daniel Patrick Moynihan. Thanks to the late senator’s prodding, the feds, who operated the Coast Guard base, “sold” the island to New York for a dollar, one of the great real estate bargains in history. 

But precious little has happened since the transaction. Mr. Bloomberg’s intervention figures to make things happen in a big way. And New York will be better for it. 

Chances are the state’s Department of Taxation and Finance would not necessarily agree with your priorities. You’d probably hear from the agency within, what, a few days? And you can bet that the agency would not be particularly polite. 

More than a half-million New Yorkers face the above dilemma—in reverse. That’s right: They don’t owe Albany a cent. Albany owes them a refund. But even though they’ve filed their taxes, even though they’ve done everything by the book, they’re still waiting for their refunds. Why? Because Governor Paterson decided that the state doesn’t have the money, has other obligations and, in short, simply can’t afford to send excess revenue back to some 651,000 taxpayers. 

Yes, the state is in fiscal distress, although that is hardly the fault of taxpayers. Yes, Albany is confronted with very difficult choices (few of which have actually been made). But Mr. Paterson’s decision to delay payment of about $500 million in refunds is an outrage. Remember, that $500 million pot of money shouldn’t be in Albany’s hands at all. It belongs to individual taxpayers who were charged too much, but who now will have to wait for refunds until Albany gets its act together. Don’t hold your breath. 

Mr. Paterson delayed refunds due to be sent out from mid-March to April 1 in order to push the liability into the new fiscal year. By law, the state is supposed to send out refunds within 45 days, or it has to pay interest on the funds it has withheld. That, of course, means the liability will be even higher whenever Albany gets around to returning money to taxpayers. (The state says that it generally sends out nearly 75 percent of refunds within 30 days.) 

Suffice to say, if taxpayers engaged in these kinds of shenanigans, there would be hell to pay. 

The same should hold true when politicians keep money that doesn’t belong to them.