NEW YORK, Jan. 22, 2007
NYC Fights To Stay World Financial Capital
Report Warns New York Could Lose Its Position In 10 Years; City Leaders To Hold Summit
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Traders on the floor of the New York Stock Exchange, once a highly exclusive old boys' club with little competition, is today an institution which must compete with stock markets around the world. (AP)
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On Monday at City Hall, the New York leaders were expected to discuss the report from consulting group McKinsey & Company. Bloomberg and Schumer have been concerned about what they say is a growing threat to New York's position as a global leader.
According to the report, which was given to some reporters ahead of the announcement, New York and other U.S. cities are falling behind in financial services while cities including London, Dubai, Hong Kong and Tokyo are surging ahead.
The report concludes that New York and the U.S. are losing the advantage because of three main factors:
One in nine New York jobs is in financial services, which contributes more than a third of business income tax revenues to New York's economy. Nationwide, financial services is the third-largest sector of the economy, contributing 8 percent of gross domestic product, behind only manufacturing and real estate.
Bloomberg, a Republican and former CEO, spent years on Wall Street and built his multibillion-dollar fortune from the financial information company Bloomberg LP., which he founded in the early 1980s.
"The financial services industry is one reason that the 20th century was the American century and that New York became the world's capital," he said in a statement. "This is one of many challenges to our long-term health and stability that requires we move beyond partisanship to find solutions."
He and Schumer, a Democrat, were to discuss the report's findings and recommendations, which include some changes specific to Sarbanes-Oxley, the anti-fraud law enacted in 2002 amid a spate of corporate scandals.
Already, the Securities and Exchange Commission last month agreed to ease some rules within Sarbanes-Oxley, but the McKinsey report suggested the SEC should go further and consider exempting foreign companies from certain parts of the act, "provided they already comply with sophisticated, SEC-approved foreign regulators."
The report also raises the idea of creating a special "international financial services zone" in New York, where tax breaks and other incentives could be used to lure new foreign firms.
Other suggestions include a Congress-created commission on financial competitiveness, to address the structural issues for the long term, and a similar local venture to promote New York's interests.
According to the report, the trends being observed today could result in significant setbacks: The United States stands to lose "substantial market share in investment banking and sales and trading over the next five years," equal to billions of dollars (euros).
"The last thing that New York and the country for that matter need is to wake up one morning and find we are no longer the financial capital of the world," Schumer said.
To reach its findings, the McKinsey team interviewed more than 50 CEOs and business leaders, and gathered information through surveys of more than 300 other leaders and senior executives.
McKinsey, founded in 1926, advises top companies on operations, organization, strategy and technology.
By Sara Kugler © MMVII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.
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- Why is China the bad seed in every discussion about downturns of the USA? Stick to the topic, will ya'? The article didn't even mention one Chinese city as a potential challenge to NYC (Hong Kong does not count). How about London and Tokyo? The shift in financial importance of cities is just an inevitable part of the world's cycle, just like countries like China used to be powerful a few centuries ago, but went downhill sometime in history. Stop whining and blaming your own problems on others.
- Reply to this comment
- Har har, "McKinsey" tells us, in all sincerity, that the biggest problem to America is Sarbannes-Oxley. We should believe them, they are very trustworthy. It's a horrible problem, yes. You know what, if we don't repeal Sarbannes-Oxley, then, heaven forbid, many CEO's won't want to continue their jobs at 5000000000 million dollars a second for the rest of their life. so corporations will have to pay even MORE to attract "top talent" like Kenneth Lay.
It's a crisis! Repeal Sarbannes-Oxley now! It can't go on this way .... we may lose some of our "top talent" to other countries like China .... Yes, China wants our CEO's and business leaders they have done such a GREAT JOB with our businesses like Ford, they must want our corporate talent. The Chinese want to become a debtor nation, they want it so badly, but their CEO's just keep acting patriotic and ringing up huge import profits! We better act soon, or we'll lose our talent!
Yes, China and India have a lot to learn from us, they will steal all of our great financial secrets, such as downsizing, offshoring, inappropriate mergers, betrayal of the country, stealing, criminal acts, bizarre selfish self-indulgence by the leadership. Thanks, McKinsey, for the advice - its jsut as good as the advice you gave Ford in the 1980s, thanks, America needs it, thanks again - ooh look China, go over there. Give them some "advice" would ya. - Reply to this comment
- Unfortunately, the new world order of free trade agreements mean that big money can and will travel to wherever the regulations are least effective or nonexistant. There's really no stopping money and activity from gravitating to whatever place has the lowest standards, and we can't and shouldn't compete to become that place.
We need to consider what exists in the New York and other American markets that have kept them competitive in these last 20 years when they could have lost out to emerging stock markets. One feature are the specialist firms who agree to absorb risk and buy back shares in an illiquid market situation; so long as a market remains liquid enough and doesn't suffer from big downward moves, which seems to be a feature of foreign exchanges, American exchanges look good.
The health of the US financial system including public debt was a big incentive to foreign investment until the Bush administration; Wall Street understands what their conservative allies fail to, that a healthy public sector is not expendable, it is an integral part of the economic engine. Fixing the currency, deficit, and public debt are all vital to retaining America's attractiveness to foreign investors. - Reply to this comment
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