Bloomberg/Schumer Report: NY in Danger of Losing Status as World Financial Center Within 10 Years Without Major Shift in Regulation and Policy
Today, U.S. Senator Charles E. Schumer and New York City Mayor Michael R. Bloomberg released a groundbreaking report revealing that New York could lose its status as a global financial market without a major shift in public policy. Schumer and Bloomberg, together with New York Governor Eliot Spitzer, warned that New York financial markets, stifled by stringent regulations, and high litigation risks, are in danger of losing businesses and high-skilled workers to overseas competitors, relegating New York to regional market status and adversely impacting the U.S. economy. Today, Schumer and Bloomberg, with the backing of Governor Spitzer, unveiled a sweeping plan to revitalize U.S. financial markets and reaffirm New York’s position as the financial capital of the world.
“If New York goes from being the financial capital of the world to becoming only a regional market, as this report predicts will happen within the next ten years, every aspect of New York life will suffer, not just financial services,” Senator Schumer said. “The fact that Eliot Spitzer has joined us shows a united New York front in fighting hard to keep us where we should be, as number one.”
“Let's be clear: The financial services industry is one reason that the 20th century was the American century and that New York became the world’s capital,” said Mayor Bloomberg. “We've outlined a range of practical yet innovative steps to ensure the 21st century is just as bright. This is one of many challenges to our long-term economic health and stability that require we move beyond partisanship to find solutions.”
“The financial markets are a cornerstone of New York State's economy yet, as the study illustrates, we are in danger of losing our pre-eminence as the financial center of the world,” said Governor Spitzer. “We must take these recommendations seriously so as to support an economic climate ripe for financial services while continuing efforts to safeguard the market for investors. I applaud Senator Schumer and Mayor Bloomberg for their visionary leadership and look forward to working with them.”
“If we don’t address these problems now, New York is in danger of becoming a secondary city instead of the world capital it deserves to remain,” said Deputy Mayor for Economic Development, Dan Doctoroff. “This report demonstrates what we suspected – the impact to our economy will be severe and the job cuts and financial toll painful.”
Senator Schumer and Mayor Bloomberg commissioned the joint report, “Sustaining New York’s and the U.S.’s Global Financial Services Leadership,” which sets out a series of recommendations to counter emerging threats to the United States’ position as the world’s financial leader, with a two-tiered package of national and local measures aimed at removing impediments to financial services competitiveness both domestically and internationally.
Left unchecked, today’s trends could significantly negatively impact the U.S. economy. The United States would miss out on between $15 billion and $30 billion in financial services revenues annually by 2011. Those revenues, if retained, could translate into as many as thirty to sixty thousand jobs in the U.S.
The joint report stipulated that while many of the causes are due to improved markets abroad and sophisticated technology that has virtually eliminated barriers to the flow of capital, a significant number of the causes for America’s declining competitiveness are self-imposed. For instance, U.S.-based financial services firms are now unable to attract and retain many of the highly-skilled professionals they need because of caps on the number of visas available under U.S. immigration rules. A greater perceived litigation risk has also reduced the appeal of the U.S. market to many foreign firms. Finally, a complex and sometimes unresponsive regulatory framework has not only prompted many foreign firms to stay out of the U.S. markets, but also is forcing more business overseas because of the complexity and cost of doing business in U.S. financial markets regardless of where they are located.
The joint report offered several recommendations, derived from detailed analyses of market conditions here and abroad, informed by interviews with more than 50 respected leaders drawn from the financial services industry, consumer groups, and other stakeholders. The recommendations focus on near-term administrative actions that can signal renewed U.S. focus on competitiveness, actions to level the playing field for both domestic and foreign companies doing business in the United States, and longer-term initiatives to address more complex policy, legal, regulatory and other structural issues affecting the U.S. position as the world’s leading financial center.
Identifying access to skilled professionals, a fair and predictable legal environment, and a responsive, market-oriented regulatory framework as top determinants of financial services competitiveness, the Mayor and Senator called for a coordinated, non-partisan implementation effort to improve America’s performance along each of these dimensions and thereby strengthen the third-largest sector of the U.S. economy. Forming new public-private partnerships at the city and national levels to tackle these issues is an underlying theme of the joint report.
Mayor Bloomberg emphasized that policymakers must avoid complacency about New York’s long-term future as a world-leading financial center. “Our capital markets and financial services firms will only enjoy continuing growth – growth that our city expects, needs and demands – if we take seriously the challenges from rapidly-expanding competitors in Europe and Asia,” said the Mayor.
Senator Schumer pointed out that strong financial markets are crucial to the health of both New York’s economy and the nation’s; financial services drive 8 percent of U.S. GDP, and create more than 5 percent of all jobs nationwide. “This is not simply a New York issue,” the Senator said; “Seven states, including New York, have more than 10 percent of their state’s GDP derived from financial services, and strong financial services are important to everyone regardless of where they reside or do business.”
The joint report outlined a number of recommendations intended to improve America’s financial services competitiveness for both the United States and New York, described on the attached Fact Sheet.
In its analysis, the joint report highlighted the fundamental importance of the U.S. financial services sector to the national economy. Although U.S. financial markets lead globally in many dimensions – the U.S. is still the world’s largest repository of financial stock and it derives more revenues from financial services than any other country – this leadership is under significant threat as a variety of forces combine to undermine U.S. competitiveness.
Recommendations to sustain the nation’s and New York’s global financial services leadership: ·
- Provide clearer guidance for implementing the Sarbanes-Oxley AcT
- Implement securities litigation reform with particular short-term emphasis on leveraging the SEC’s existing authority
- Develop a common vision and a supporting set of shared regulatory principles
- Ease immigration restrictions facing skilled non-US professional workers
- Recognize IFRS without reconciliation for listing purposes and promote convergence of accounting and auditing standards
- Protect US global competitiveness in implementing the Basel II Capital Accord
- Form an independent, bipartisan National Commission on Financial Market Competitiveness to resolve long-term structural issues
- Modernize financial services charters and holding company structures
- Establish a public/private partnership to promote New York’s local agenda by acting as the high-level liaison
- between individual industry participants and the city, as well as by driving forward the partnership’s broader strategic plan for New York’s financial services development
- More actively managing attraction and retention for financial services
- Establishing a world-class Center for Applied Global Finance, and
- Potentially creating a special international financial services zone