-Matthew Schuerman

"We are cautious on the banks," Mr. Mayo said. "More and more, we see them relying on hot money for their funding-and what's more, they have more than $1 trillion in risky, potentially bad loans off their balance sheets."

Short and peppy, with a crooked smirk of a smile and hair cut stylishly short, the 38-year-old Mr. Mayo cut a funny figure among the analysts sitting together in the St. Regis Hotel's swanky Versailles Room. He wore a sparkly orange Hermès tie, and viewed from the audience gathered for a two-hour session on bank and insurance stocks, he had the look of a young Danny Thomas-or as he described himself, "You can't miss me; I'm an ugly version of Tom Cruise."

But the message Mr. Mayo came to bring-the one he's been spouting for years-was far from funny, either to those in the room or to the thousands of New Yorkers in the banking and insurance industries.

The markets are getting crunched, investors are panicky, and Mike Mayo has a sell rating on 16 of the 35 stocks he covers-a ratio in sharp contrast with the sell-ratings figure of 3 percent that currently prevails on the Street.

Pessimism and skepticism, the great attitudes of past bear markets, are making a comeback, and Mr. Mayo-who wields a sell rating like his fellow bankers wield a cell phone-is suddenly front and center.

He's the analyst to watch and listen to: the Henry Blodget of the moment, bringing to the banking and insurance industries the kinds of ratings that can send stocks spiraling downward, in much the same way that Mr. Blodget once sent them soaring.

A darker, more cynical mood prevails on Wall Street these days. As The New York Times reported, Mr. Blodget, Merrill Lynch's effervescent Internet analyst gone off to write his memoirs. And now Mr. Mayo is perfectly placed-the anti-Blodget if ever there was one.

Mr. Mayo is not writing his memoirs. In fact, his approach to the moment is to don a green eyeshade and search out the bitter accounting truths of the companies in investor portfolios.

Forget about schmoozing with chief executives or putting a buy rating on a company to grease the investment-banking wheels. Geekdom is in. Better to know for yourself the hard, cold numbers than to trust the corporate sleight-of-hand that has left many a happy, enthusiastic investor regretting that he or she didn't take their eyes off the cheerleaders and watch the players more closely.

For almost 10 years now, Mr. Mayo has been peddling that very investment philosophy. With a mathematics degree from the University of Maryland and an M.B.A. from George Washington University, Mr. Mayo came to Wall Street in 1992, following four years as an analyst at the Federal Reserve. A product of the Maryland suburbs, he was intrigued by the flash and dance of the Street. He was always a smart kid; now he would get paid for it.

After spending some time as a junior analyst at the Union Bank of Switzerland and Lehman Brothers, he moved to Credit Suisse First Boston in 1997, and soon began polishing his contrarian tone. The culmination was his famous call in 1999 when, as a senior bank analyst at CSFB, he recommended that his clients sell bank stocks across the board.

The bull market was still in full force, and sell ratings, especially on high-profile bank stocks, were mostly unheard of-especially at CSFB, which had banking relationships with many of the companies on Mr. Mayo's sell list. Yet, sure enough, the banks crashed. Mr. Mayo, however, got little thanks for his call.

While there were those who appreciated his blunt views, the banks on the receiving end were less enamored-to say nothing of his employer. So when CSFB merged with Donaldson, Lufkin and Jenrette in September 2000, Mr. Mayo and his team of analysts were fired. Ranked No. 2 by Institutional Investor magazine, Mr. Mayo was replaced by a lower-ranked D.L.J. banking team.

By all appearances, it seemed that another analyst was out because of an unpopular-though correct-call.

(The Securities and Exchange Commission is already investigating CSFB's tech-banking, research and public-offering practices, and the recent case of CSFB media analyst Laura Martin, who was fired a month after she downgraded her entire range of stocks following the Sept. 11 attack, suggests that bankers and analysts continue to butt heads. Earlier this year, CSFB brought in John Mack as its chief executive, partly to shore up the Chinese wall between analysts and bankers.)

But though Mr. Mayo may have been a martyr, the ignominy of being out of a job still looms large in his mind.

"It was very scary," he said, digging into a cold chicken platter after his luncheon presentation. "I was ranked No. 2 by Institutional Investor in two different categories. I'd reached the highest level of my career, and all of a sudden I couldn't find a job." So he settled in at his Upper East Side apartment and put in calls to everyone he knew-friend and foe. No interest.

Despite being interviewed by all the major firms, not one offered him a lifeline. "They would say to me, 'We want to make sure that you are mature in how you approach companies,'" he recalled. "With 'mature' meaning 'Can you make friends with management?'"

Indeed, there had always been criticism leveled at Mr. Mayo for proclaiming, perhaps a bit too loudly, his antipathy for, say, a Bank of New York Company Inc., a Bank One Corporation or a J.P. Morgan Chase & Company. Brash and not a little bit preachy, Mr. Mayo had a way of sticking out from the pack, and not a few of his peers saw his schtick as self-serving. Not surprisingly, Morgan Stanley and Merrill Lynch didn't rush in with offers. In a market still in love with itself, Mr. Mayo's act had become stale.

So Mr. Mayo played Mr. Mom, taking his 5-month-old daughter to music class in Manhattan-"just me, my daughter, six nannies and two mothers," he recalls-though he was still plugging away on the phone.

Finally, in February, a break. Prudential Securities, in an effort to cut costs and differentiate itself from the bulge-bracket firms, had fired a good chunk of its investment-banking staff and announced that from here on in, its research would utilize the sell rating on a more frequent basis. Indeed, there was no need for Prudential to brag of the wall between research and banking, because the firm had few real bankers to speak of.

Mr. Mayo and his five-strong team of analysts had suddenly found not only a home, but also a market environment more conducive to their damn-the-bankers style of research. "I was hired to be a role model," Mr. Mayo said. "To be a catalyst, to show how you can use an unbiased research strategy. My main goal is to make investors money with my recommendations, but I also want to make it easier for people to use sell ratings."

He didn't waste much time. First came the Bank of New York, which was trading at $47 in mid-March. Mr. Mayo slapped a sell rating on the stock, even while the vast majority of his peers maintained buys. It now trades at $39, after hitting a low of $30. Then came J.P. Morgan Chase. Mr. Mayo put a sell on it in May, when the stock was in the high 40's. Now the stock changes hands at around 39, off a recent low of $29. Yet despite the support of his firm and a Street environment admittedly more receptive to sell ratings, the going remains tough.

"I'm still getting beaten up. It's like getting punched about 10 times," he said. "'You have not done your homework,' they say. 'You're doing it for P.R.'" While the companies that Mr. Mayo follows pretend to tolerate him, they also go out of their way not to help him, refusing to answer his questions on conference calls and limiting his access, he said. But with the continuing application of Regulation F.D.-an S.E.C.-imposed ruling that prevents companies from doling out private information to privileged analysts-lack of company cooperation matters little. Mr. Mayo said that he and his team just burrow all the deeper into the regulatory filings.

Mr. Mayo has also found that company cooperation matters even less in a dicey market. "Management does not telegraph when something is going to go wrong," he said. "'You don't know what you're talking about,' they'll say. Ironically, I've found that whenever a company fights me the hardest, that's when they're having the most problems."

This is all well and good for Mr. Mayo's reputation as a contrarian, but whether or not a sell-first-ask-questions-later research strategy can be a money-maker for a securities firm, even in a bear market, is still very much in doubt. It's a well-known fact that research staffs at all the major banks lose money; investment-banking fees are how the banks earn their billions. So how will tiny little Prudential make money off Mr. Mayo?

Probably with some difficulty. "Our pitch is, 'Please, Mr. Investor, reward us for our effort, because it takes three times as much work to do [your] research by independent means than to get it spoon-fed by management,'" Mr. Mayo said.

Every day now, Mr. Mayo calls down to his traders to get an idea of how much trading volume they're doing in bank stocks. "We've got momentum," he said, "but we need to see more of it."

And so what if he's become a little bit obsessed? Asked what hobbies he has, Mr. Mayo thinks a bit, but can't really come up with an answer. "I did do a 1,500-page report on the banking sector a few years ago, to let people know that I really know what I'm talking about," he said.

Would that count as a hobby, then? "Well, I do like to read philosophy-though it's been years [since] I've read that kind of stuff," he said. "So, yeah, I guess you could say that my job has been my hobby."

For the moment, Mr. Mayo may well be Wall Street's top geek. Which is the way he's always wanted it. "It's nice when the style of research you've always practiced comes back into vogue," he said.

The date was Nov. 1, a mere three weeks after Mr. Simmons had, without warning, announced his retirement. He was gone, and his plan to spin off Prudential Securities from its parent company, Prudential Insurance, was apparently gone with him.

But Mr. Simmons' vision for a free-standing securities firm-perhaps in partnership with Lehman Brothers-was almost tangible in that Plaza ballroom. It was the last day of a two-day high-tech conference run by the firm's newly formed technology division, the Prudential Volpe Technology Group. And in a starring role was Mr. Simmons' protégé, Mr. Acampora.

As Mr. Simmons, 60, had made Mr. Acampora, Mr. Acampora, 59, had helped to make Prudential Securities. His bold call in 1995 that the Dow would hit 7,000 brought Mr. Acampora a large dose of Wall Street fame, burnishing as well the high hopes Mr. Simmons had for his firm.

And now there Mr. Acampora was, doing his schtick, plugging along in his mentor's image, pushing his new book and an idea that Mr. Simmons had loved. Part Henny Youngman-"Hello. Is anyone out there? What am I looking at, an oil painting?" he cracks when one of his many jokes falls a little flat-and part a sophisticated reading of the market's tea leaves, Mr. Acampora was there to boost confidence. The message? The tech boom and the peace dividend were just now kicking in; stocks will be going higher.

This was it. The very pith of Mr. Simmons' vision.

But no Mr. Simmons.

Mr. Simmons, finally, had run out of luck. No one on the Street was all that surprised when Arthur Ryan, chief executive officer of the parent Prudential Insurance company, accepted Mr. Simmons' resignation on Oct. 6. Did Mr. Simmons really think that tiny little Pru could make a run at the big boys by riding the Ralph Acampora boomlet and snapping up the odd West Coast tech boutique? No way.

As far as Mr. Ryan saw it, Prudential Securities was all about retail distribution for its insurance products. Case closed. And with Prudential Insurance's giant I.P.O. in the offing, there could be little patience for the grand banking ambitions of Hardwick Simmons.

Mr. Simmons is now retired and could not be reached for comment. But allow him a little credit for giving it the old college try. For the genial Boston Brahmin-he is eighth-generation Harvard on the Simmons side, while on his mother's side, the Stone family is about as old-line as Boston families get-his 32-year run on Wall Street had been a blessed one.

It goes something like this: He started out at the semi-white-shoe outfit Hayden Stone & Co. (founded by his great-grandfather in 1892) in late 1967 and subsequently moved on to Cogan, Berlind, Weill & Levitt in 1970 when the family firm imploded and was bought out. There he hitched his star to Sandy Weill, and by the mid-1980's he found himself at Shearson-following its merger with Cogan Berlind-running the retail brokerage unit.

In the late 1980's, Shearson Lehman Brothers grew too big, too fast-a strategy supported by Mr. Simmons-and had to be bailed out by parent American Express. (Shearson Lehman Brothers has since broken up into various entities.) Reading the handwriting on the wall, Mr. Simmons resigned. He landed lightly on his feet, though, this time as chief executive of Prudential Securities in 1991.

Finally, it seemed, Mr. Simmons was ready to step out on his own, free from the shadows of great granddad Hayden Stone and Sandy Weill. Prudential was no picnic, though, when Mr. Simmons took over. There followed a litany of public relations disasters, and between 1994 and 1996 Prudential was forced to pay out a sum close to $2 billion in legal fees and settlements for disputed partnership claims. Not surprisingly, the firm's competitive position on Wall Street eroded. Through it all, Mr. Simmons sailed placidly along and, in the late 1990's, began to push for the separation of Prudential Securities from its corporate parent, Prudential Insurance.

Quite simply, Mr. Simmons felt Prudential Securities was ready for prime time. It was time for Prudential to move into the bulge bracket-to go head-to-head with the likes of Goldman Sachs and Morgan Stanley Dean Witter. He had his 6,500-strong retail sales force. And, as it turned out, he had Mr. Acampora.

Mr. Acampora is a rough-hewn man with a broad, friendly face who lacks the pretensions and gloss of many Wall Street talking heads. His suits are off the rack and his ties tend to have pictures of buildings on them. A product of the South Bronx (his father was a truck driver), he is an Iona College graduate who spent two years in the seminary studying for the priesthood before giving in to the stock-market bug. He started at the bottom in the early 1960's, studying technical analysis for a number of now-defunct brokerage houses.

And then came "the call." In June 1995, Mr. Acampora-at the time the firm's technical strategist and largely an unknown name on the Street-stepped forward, with the Dow then around 4,500, and penned a now-famous research report forecasting a 7,000 level for the Dow by 1998.

"I lost a lot of sleep over that," Mr. Acampora remembered, sitting in his office surrounded by the blink and bleep of screens and monitors. "I was getting a lot of criticism, too. 'What are you smoking?' people were asking. You have to remember that Wall Street was convinced at the time that we were headed into a bear market."

When the Dow burst through 7,000 in February 1997, Mr. Acampora was suddenly famous. Knowing it had a hot commodity on its hands, the firm started flogging him. "The 7,000 call was just the beginning," says Rich Franchella, national sales manager for Prudential. "Ralph became a media hero, and we knew we had something. So our marketing department said, 'Let's put Ralph out there in a more public way. Let's put him front and center for our clients.'"

Indeed, Mr. Acampora became ubiquitous: a regular on CNBC and Louis Rukeyser's Wall Street Week . Mr. Simmons was beside himself. "Ralph, that was the best call I've ever heard," he said to Mr. Acampora. He also wanted to know, "What can I do for you?"

"I was in Detroit at the time," recalled Mr. Acampora. "Wick said, 'I'd like to get you a gift. Anything.' So, jokingly, I said: 'How about a red 1962 Corvette?'" A month later there it was, wrapped up in a bow and parked outside the Prudential offices in 1997. "Dow 7000" read the license plate. Mr. Acampora later changed the plate to "Dow 10000," and now it reads "Dow 22000"-his latest forecast for the index.

So Mr. Acampora became a star, and business on the retail side boomed. And what a thrill it was. "CNBC was all over me," Mr. Acampora enthused. "They had already made Abby Cohen the Queen of Wall Street. Now I was going to be the king."

Recently, he wrote a book: The Fourth Mega-Market, Now Through 2011: How Three Earlier Bull Markets Explain the Present and Predict the Future . Mr. Simmons had pushed him to write it; the firm was aggressively marketing it nationwide, sending the indefatigable Mr. Acampora out on multi-city tours. Clients loved him. The sales force loved him. Mr. Simmons loved him.

And of course, Prudential benefited. Up until 1996, the Pru name was suggestive of nothing more than lawsuits and fraud cases. But would Mr. Acampora's leap from the other side of the tracks be enough to solidify Mr. Simmons' long-standing ambition to run a truly big-league investment house worthy of the Stone name?

Mr. Simmons knew he needed to provide a competitive institutional service to institutional clients. In that vein, he branched out globally, opening an office in Shanghai, and became acquisitive by buying a niche investment bank specializing in health care in June 1999.

Last December, Mr. Simmons paid $150 million to buy Volpe, Brown, Whelan & Co., a second-tier boutique investment bank in San Francisco, to sate his institutional clients' ravenous demand for cutting-edge tech coverage. It was a rich price, and there had been a raft of high-level defections from Volpe since the deal's close, but a rump remained and Prudential Volpe Technology Group was born. It was Mr. Simmons' boldest step to persuade his bosses at Prudential Insurance that the securities arm could go it alone.

And an even bolder plan was apparently in the works. Market scuttlebutt has it that Mr. Simmons had been in talks with Lehman Brothers Holdings Inc. about a possible merger earlier this year. But the corporate parent was not ready to sell (especially with Mr. Acampora's star so brightly ascendant) in advance of its long awaited I.P.O. The insurance company saw its securities arm as a prime outlet for all its many products; why give it up now?

"Prudential Insurance was never going to fund Hardwick Simmons' dream of creating a mini–Morgan Stanley," said an analyst who preferred to remain on background (Prudential's I.P.O., expected a year from now, will be a very large one, so analysts are loath to take their views public these days).

So once again, Mr. Simmons has fallen on his sword. And since his resignation, his successor, John Strangfeld, has started undoing much of his predecessor's work. In late October, 425 jobs were eliminated when the company's institutional bond department was shuttered, with more pruning expected in the coming weeks. The goal is to focus the business entirely on the retail end.

So good-bye, overpriced i-bankers and hello, Ralph. What does Mr. Acampora think?

"Look, it's a business," he says. "Wick wanted to make Prudential competitive. The other guy [Prudential Insurance chief executive Ryan] said no. Am I upset? No. Do I still admire him? Yes. I have the highest regard for Wick. He took a firm that was in bad shape and made it respectable. In the end, he gave us enough rope to either climb up to the sky or hang ourselves."

Of course, he had a few things going for him, not the least of which were intelligence and energy. He won, and went on to become an in-house critic of the Council's go-along, get-along culture. This, as you might imagine, didn't make him particularly popular with his colleagues, which is a pretty good testament to his character. It also suggested that his tenure would be short and free of pleasant memories.

For a while during the early 1990's, Mr. Millard and Council member Sal Albanese, a Democrat, were cross-party allies of a sort, both of them choosing dissent not for its own sake (or for the attendant publicity that dissenters inevitably get) but as a reminder that the Council had yet to establish itself as a serious legislature, despite claims to the contrary. Getting Council members to take themselves seriously has never been a problem; getting them to do the work so that others might take them seriously is, well, not the most rewarding of tasks.

Mr. Millard's frustration was evident. Operating under the understandable but mistaken belief that things had to be better in Washington, he tried to win promotion to Congress in 1994. Political science students may recall that way back in 1994, before a chunky intern changed the face of modern politics forever (or for a year, whichever comes first), the nation was kind to Republican candidates for Congress. Not so the reconfigured, triborough 14th District, with the silk stockings of the

Upper East Side jammed into a drawer with the sweat socks of Williamsburg, Brooklyn, and Astoria, Queens. The one-term incumbent, Carolyn Maloney, directed her rhetoric not against Mr. Millard but against Newt Gingrich, then just another demonic revolutionary threatening the status quo. Mr. Millard lost badly, and summed up the experience in a phrase that any Monty Python fan would recognize: "She turned me into a Newt."

He got better.

Mayor Rudy Giuliani rescued him from the Council by naming him president of the city's Economic Development Corporation in 1995. "In the Council, being a member of the loyal opposition doesn't necessary lead to accomplishments," Mr. Millard said. "But at E.D.C., I was given a chance to get things done." And now, 10 years and five children after entering public service, Mr. Millard is taking a private-sector job with Prudential Securities that no doubt will help keep fresh milk in the refrigerator and new shoes on all those little feet.

I'm not in a position to tell you what kind of job Mr. Millard did at the E.D.C., although it seems fair to say that somebody has been doing something right in recent years. The agency has been involved in deals leading to the construction of the Condé Nast tower and the new Reuters building, the proposed construction of a movie studio at the old Brooklyn Navy Yard and the development of high-tech businesses in Silicon Alley. "The bottom line about E.D.C. is that we try to create an environment where people can be self-sufficient and feed their families," Mr. Millard told me.

I know that some of the E.D.C.'s corporate retention deals, known to critics as corporate welfare, have come under fire, perhaps rightfully so. But Mr. Millard and I have had long talks over beers about the plight of government agencies trapped by the reality of political boundaries while trying to work with the creators of our famously borderless economy. Say what you will about the merits of individual deals, or condemn outright the whole notion of corporate retention, but Mr. Millard's big-picture, philosophical view of his dilemma offered a hint of the complexities he faced, and that others in the corporate-retention business will continue to face as long as capital is borderless and local governments aren't.

At 42, Mr. Millard is young enough to return to politics should he choose, but he seems ambivalent about the prospect, as, unfortunately, any sane person would be. "One of my frustrations in elective life was the incredible amount of energy and time that was focused on merely myself," he said. "It was about getting my name in the paper or getting my face in the newspaper, none of which advanced the cause of any bill or constituent service. Rather, it advanced the cause of raising money for my campaign." While the work and energy level didn't diminish at E.D.C., he said, "at least things were getting done, so you don't get the feeling that you're focusing on things that don't matter."

The shame of American politics is that so many people find themselves strangers to their families in the pursuit of things that don't matter-like raising money, and raising more money. Mr. Millard no doubt considers himself lucky. He, at least, got a chance to do something real.

What was I doing there, I thought, wasting my time on a Wednesday morning? Was I waiting for hot theater tickets? A handout of surplus diamonds? Viagra for females ? Nope. I was at the annual Kate Spade sample sale. I, and the hundreds of women with me, were in search of the perfect bag.

"I've been waiting for an hour and 45 minutes," said Christina, a tall, blond jewelry designer from northwest Connecticut. "I got on the train at 6 in the morning to come down here. I tell myself that I'm not going to spend a lot of money, but you get swept up in the frenzy … For what they are, they don't seem worth it, but when you have a fetish you have a fetish."

What was she looking for?

"Basic black. I bought a rattlesnake print one a few years ago and it just didn't last through the seasons."

I am more of a fuzzy-sweater woman than a DKNY girl. My friends had dragged me to the sample sale in an attempt to dress me more appropriately. They are fed up with my current choice of bag, a red rip-stop nylon backpack left over from college, which I enjoy because of its large size, its uncanny ability to deflect dirt and spilled beer, and its general overall comfort.

But in a city that provides a series of challenges, perhaps one of the largest for women is the decision of what purse will suit all of her needs. How does one leave the apartment in the morning and carry makeup, wallet, checkbook, newspaper, book? How does one then add the items needed to be prepared not to go home before a spontaneous evening out (different makeup, more money)? And what about being ready for the off-chance that she might not go home at all? Downtown girls have recently adopted the shoulder-slung, back-breaking, utilitarian messenger bag. Sensible uptown girls who believe firmly in the value of a good Frédéric Fekkai haircut make it clear the Kate Spade bag is the way to go.

If you don't know by now, Kate Spade founded her business in 1993 and her minimalist, boxy bag with a snap clasp has driven her company's annual profits to $28 million. She designs bags in many textures and colors, but the most popular bag she sells is made of black nylon, lined inside in either black or patterned material, with a simple white label on the outer top reading "Kate Spade New York." It retails at Bloomingdale's for approximately $250. It is a bag that could be described at best as "plain," but there is a stigma-or is it an

aura?-that goes with this purse. In the last few years, this bag has worked its way into the uniform of well-dressed-but not ridiculously wealthy-young professional women. A woman who wears a Kate Spade is image-conscious, clean-cut and able to shell out some, but not too much, cash. "The Kate Spade bag," declared my co-worker Daphne, a fashion-conscious, Upper East Side advertising saleswoman, "is what you buy when you can't afford Prada yet."

So I gamely lined up.

Judging by the women in line hoping to buy this magical bag for half of its standard price, Daphne had pegged the Spade shopper. No one was over 35, the wildest color of suit was beige and, from the amount of anxious watch checking going on, everyone seemed to be missing work. In short, they all looked a lot like me. Well, not that much like me.

But don't get me wrong. As an avid bargain-hunter, I came willingly. But after waiting half an hour and moving only a few feet ahead in line, I begin to think this whole quest was pretty surreal. Behind me, a woman at least six months pregnant stood swaying slightly and clutching her large black Kate Spade tote. "I'm here to buy the Kate Spade diaper bag," she said. "It'll be priced here at $275 as opposed to $450. It's worth the wait."

A young girl wearing a plaid uniform from Chapin, the private girls' school on 84th Street and East End Avenue, waited bare-legged and shivering. "I have about four Kate Spades, but I want something bright for summer," she said. "I might not make it back to class, though."

Jason Hoffman, a financial adviser for Prudential Securities, was the only male in the line. "I'm here for my fiancée. I'm going to try to find her something in leather," he said. Then he leaned in. "But I tell you, this is a great place to meet women."

The doorman shouted at us to visit the A.T.M. before entering. Women were staggering out with plastic bags full of Kate Spade, admitting to spending $1,000 inside. Finally, I reached the front and was ushered into the elevator by a gruff but friendly superintendent named Joe. "Two thousand people yesterday. It's been crazy!" he said. He let us out of the elevator into the showroom, which is spare, white and elegant. Tall, thin women wearing knee-skimming skirts, ballet flats and upswept hair glided from room to room purposefully, checking merchandise, pricing and preparing for further throngs of shoppers. I wrestled past a brunette in a slate Calvin Klein suit into the room where the sale was taking place, and was surprised to find myself anxious and sweaty.

Would I find a bag? There were so many! Striped ones, fuchsia ones, bags made of straw and plastic. Some sparkled, some had interesting textures, others had silk tassels. There were bags so big that I could take my golden retriever, Sam, along for the day, and bags so small that all I could fit into it would be a smallish tube of lipstick.

And then I saw it. My perfect bag was made of green nylon, sitting in a row of six others just like it. It was about the size of a large loaf of bread. This was the one. It was so square! It had zippers! And snaps! And green handles! Not to mention the little label. It cost $90, hardly a bargain objectively, but at other places this bag cost much, much more. And was green. Green!

I snapped it up and headed to the checkout line, where there was a further delay of 30 minutes because the saleswomen were having trouble counting all of the money. People talked excitedly about their new bags, how perfect they were, what they would match. I eyed them warily and clutched my new purse a little tighter. Finally, I slid over a $100 bill, the wisp of a salesgirl gave me $10 back, and the purse was mine.

Then, a quandary: I now had two bags. Which do I carry? Should I play the sophisticated young working woman-self-supporting, nobody's fool-with the Kate Spade? Or should I stick with the shabby, faithful knapsack, the bag I know and love?

I stuffed the Spade inside my backpack and walked out into the chilly air.

According to documents obtained by The Observer , the Empire State Development Corporation stepped in and added an additional 71,442 square feet–the equivalent of a total of perhaps three and a half floors–to the two sites at the southern corner of 42nd Street and Seventh Avenue. A spokesman for the E.S.D.C., which is an arm of state government, confirmed that the changes had been made and insisted they would not add to the height or bulk of any skyscrapers that may be erected on the two properties. Some real estate executives familiar with the sites, however, find this difficult to believe.

If the changes increase the size of the as-yet-unbuilt office towers, there may be public outcry, and Mr. Zuckerman may yet again find himself in the midst of a nasty neighborhood battle. Community and civic groups have long objected to plans that would allow massive skyscrapers to be erected on the eastern end of the Deuce with huge taxpayer subsidies, just as a previous generation of activists shot down Mr. Zuckerman's plans to develop Columbus Circle.

Even if the changes do not result in larger buildings, however, they have made it easier for Prudential to market the sites to a partnership consisting of Mr. Zuckerman's Boston Properties, developer George Klein and the Blackstone Group. The partnership paid an estimated $180 a square foot for the two sites. "I would say the average in midtown is $80 to $100 a foot," said Gerard Mason, senior managing director of Granite Partners Inc., a real estate investment bank. "So this sort of blew the socks off things."

The adjustments may have enabled Prudential to reap an additional $12 million from the deal, which has yet to be completed. The two sites now total 1.9 million square feet, according to confidential Prudential sales materials and an E.S.D.C. document.

The E.S.D.C.'s intervention is another reminder of the lengths to which the state is willing to go to assist developers in Times Square even though the real estate market is hot. Prudential was selected by the city and state in the mid-1980's to develop skyscrapers on four 42nd Street sites with Mr. Klein's Park Tower Realty Corporation and was awarded numerous tax incentives. But their plans fell apart with the real estate recession of the early 1990's, and Prudential abandoned its development plans. Now, however, the insurance company is profiting from the upswing in real estate, with the help of the state.

An E.S.D.C. spokesman said the agency decided to make the changes because of a flap earlier this year between a partnership consisting of Reuters America Holdings Inc. and the Rudin Management Company on one side and Prudential on the other over the purchase of a third development site that the insurance company had controlled on the northwest corner of 42nd Street and Seventh Avenue. According to real estate sources, Reuters and Rudin decided that the $90 million site didn't have enough square footage for the 30-story Reuters corporate headquarters that they had planned to build there.

Dismayed, the partnership went to Prudential and demanded that the insurance company transfer some of the development rights it owned on 42nd Street. Prudential refused, saying the partnership's office tower didn't fit on the site because Reuters and Rudin had changed their building plans. Other insiders, however, believe it was Prudential's method of measuring that caused the problem. The partnership finally was forced to enlarge the site by purchasing a small four-story building and alley on West 43rd Street owned by the New 42nd Street, the group that oversees 42nd Street's landmark theaters.

Time Out for a Measurement

To avoid another such dispute, the E.S.D.C. remeasured the two remaining sites and found additional square footage. The state agency has the final say over the design of the four sites, which were originally supposed to have been developed by the insurance company.

The E.S.D.C. spokesman was adamant that the extra square footage would not result in a larger building for the two sites. However, he added that "if a developer can make use of those [additional] square feet adhering to the [E.S.D.C.] design guidelines, then the developer can do that." According to the Prudential documents, the amount of rentable space in at least one of the allowable buildings didn't change at all because of the remeasuring.

Even so, some real estate executives wonder how the state can add roughly three and a half floors of buildable square feet to the two sites without producing some commensurate heft in the skyscrapers that are eventually built there. If nothing else, they add, it's possible that whoever bought the sites might have run into the same problem that Reuters and Rudin encountered and been forced to build smaller buildings if there were no adjacent land or development rights to be had.

One thing's for sure: The Zuckerman team will need to develop all the space it can get on the two sites. Top brokers estimate that the publisher and his partners will have to get more than $50 a square foot from tenants to break even after paying Prudential such an astronomical price. Not all of them are convinced the skyscrapers will command such high prices, although some are cautiously optimistic. "Times Square doesn't have the prestige of Park Avenue or Sixth Avenue," said David Levinson, executive managing director of Insignia-Edward S. Gordon Company. "But there are some tenants that are going to want to be there because of [Times Square's] high-energy image, which is very entertainment- and media-driven."

If that's the case, the Zuckerman team would seem to have done quite well from the deal. Certainly, Prudential already has. (Boston Properties did not return a call from The Observer seeking comment. A Prudential spokesman declined to comment.)

But some people wonder what the taxpayers are getting out of this latest concession to Prudential. Prudential and Mr. Klein were supposed to spend $91 million to renovate the ailing Times Square subway station in exchange for the right to develop their office buildings.

When the real estate market went into a tailspin, critics complain, the city and state relieved the development team of that costly obligation. Prudential and Mr. Klein still failed to build anything. Times Square turned around only after the Walt Disney Company leased the dilapidated New Amsterdam Theater in 1995. By then, Prudential had pretty much decided to abandon Times Square after investing $433 million on its failed plan.

Top o' the Market!

Now it is selling its remaining 42nd Street parcels–along with its copious tax incentives–at the top of the market. And some people believe the insurance company will actually recoup its losses without having built anything. Moreover, they question the need to build the publicly subsidized office buildings as part of an outdated plan to revitalize Times Square when Disney essentially has done the job already. "We think that the goals of the 42nd Street redevelopment have already been achieved without this additional office construction," said Lola Finkelstein, chairman of Community Board 5, "and we are concerned that the improvements to the subway don't seem to have happened. We are going to be asking about that."

Brendan Sexton, president of the Municipal Art Society, argued that the state could have used the remeasurement of the two heavily subsidized sites to extract some money for the subway station or some other public benefit from the deal. "What are we getting for this investment?" he asked. "We are a huge equity partner in this deal. We are the largest equity partner until these buildings go up, and what are we getting for our money … This is going to be the most congested corner in the city once these buildings are built."

The E.S.D.C. official seemed puzzled by such arguments. He replied that two more office buildings in the revitalized Times Square would themselves be of some benefit to the public.