NYC Fights To Stay World Financial Capital
New York City is losing its competitive edge and could give up its lead as the financial capital of the world in as little as 10 years, according to a report commissioned by Mayor Michael Bloomberg and Sen. Charles Schumer.
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