A quick glance at the headlines of any major financial new publication this week reveals that it has been a tough start to the new year for those reviled bankers. Earnings at the big banks are coming it at consistently disappointing levels, and the employees of many firms are seeing their usually-hefty bonuses cut down to size.As Via Meadia has previously noted, though this will likely generate cheers in the OWS headquarters, wherever that is these days, it might not be such good news for the rest of New York. Megan McArdle has come to a similar, sobering conclusion by looking back at the drivers behind the city’s last revival a couple of decades ago:
What turned this around was not the creative class, who were still flocking to rent-controlled apartments in the safer parts of town. No, what made the difference was money. Money bought peace among the city’s various interest groups, repaired infrastructure that had been neglected for decades, and paid for more police. It created jobs in construction and services and almost everything else you can imagine. And where did that money come from? Deregulation, and a 17-year bull market that inflated Wall Street salaries, and tax revenues right along with them. Without the financial renaissance, these days New York might well look a lot more like Detroit or St. Louis.
Indeed, as McArdle notes, the financial industry provided the state with 20% of its tax revenue just a few years ago, and without that cash–or any other truly robust industry to fall back on–New York City (and the state) are up the creek without a canoe.
If you are poor or middle class and you live in New York, brace yourself for a hit. The bells on Wall Street toll for you and me.