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NYC Set on Chasing Last Remaining Industry out of Town

Even after the financial crisis, Wall Street is still the dominant economic force in New York, accounting for 20 percent of the state’s tax revenue prior to the recession—and this is not even counting the multitude of businesses that have sprung up to support the financial sector and its employees.

Yet in the wake of  JP Morgan’s massive losses last week and the continuing controversy surrounding the Wall Street bailouts, the New York City Council is debating a measure that would require city banks to publicly disclose their efforts at “socially responsible” banking. According to the New York Times, the new requirements would encourage banks to provide more services in disadvantaged city neighborhoods. The bank’s performance in these areas, in addition to the usual considerations of fiscal soundness, would then be taken into consideration when determining where the city will deposit its money, to the tune of billions of dollars.

Many bankers, as well as Mayor Michael Bloomberg, have voiced their opposition to the new plans. The regulations, they say, would add another burdensome layer to the web of regulations that already exist at the federal and state levels. The Council, however, appears unmoved, and support of key council leaders, including mayoral candidate Christine C. Quinn, give it a fighting chance at making it into law.

If it does, its supporters on the Council will hail it as a major victory, but it will be a loss for the city as a whole. The financial industry is the one industry keeping the city alive, yet New York’s blue politicians seem unconcerned about the risks of antagonizing their major cash cow. There have already been signs that banks are beginning to move what business they can to greener pastures with lower taxes and less regulation. More legislation like this, and that trickle could become a flood.

The economic case for banks moving their headquarters out of New York is strong enough as it is. Fortune 500 countries have been decamping for decades, and as manufacturing also died, the financial industry took up the slack. There is nothing on the horizon that could replace this industry as the mainstay for the New York economy. The City Council, one of the nation’s less effective and credible legislative bodies, will now do what it can to accelerate the city’s decline.

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  • bob sykes

    Any company that is still headquartered in NYC has incompetent management. Divest it.

  • thibaud

    Sigh. It’s a measure of how misguided this blog’s priorities are that, in the same week that the biggest US financial story of the year has broken – and continues to reverberate across the markets, Washington and the popular mind – the author focuses on not our TBTF banks’ continuing incompetence and malfeasance but … the State of New York!

    Pay no attention to that banker behind the curtain!

    It’s those nasty politicians who are beating up on poor JPM and BAC and C!

  • Jacksonian Libertarian

    Good, more competition will improve investment banking, and since it is all computerized now, it can be done anywhere.

  • Kris

    Silly me! Here I thought that the appropriate model was to have businesses focus on business, and then pay taxes on their profits to bodies such as the City Council, which would then use that money for the good of the community. If businesses are now required to be directly involved in “community improvement”, why not cut out middlemen such as City Council?

  • Kenny

    Lefties will always kills the goose that lays the golden eggs.

  • Anthony

    WRM, your AI colleague, Francis Fukuyama, says when political parties use public resources and specifically government offices to provide special services we have clientelism – so rather than blue politicans perhaps in this instance we can indict American clientelism.

  • Tom Scharf

    I think NYC needs to take a long hard look at Detroit.

  • alex scipio

    Los Angeles just decided that any bank holding City money has to engage in subjectively-measured community reinvestment… or the City of LA will move its money elsewhere.

    Skip the fact that the City of LA is in debt a few billion and has no money to move… when will business start to understand that Democrats are their primary enemy.. and just STOP doing business with them?

    If the banks doing business with LA had adults at their heads, they’d tell the City – ‘fine – see ya!’ and stop doing business with LA — AT ALL. Will the banks survive? Sure – I’ll bet the cost of the City accounts is more than the rev the banks make, and the political costs are just becoming overwhelming, and only will get worse as LA gets more and more bankrupt.

    Forbes is running a good article on the best medium- and large SMSAs to do business.. with the web and current apps, and with the under-30 professional demographic moving to medium and small cities and completely able to do business globally, maybe it’s just time for Wall Street to MOVE to Main Street in Red states and go about the business in low-cost environments, acting in a fiduciarily acceptable way for their clients, ie not wasting revenue on nonsensical regulation it is easy-as-pie to avoid – by simply moving away from it?

    Sure, we used to need a large pool of folks in one physical location to conduct financial business, but, Baby, those days are OVER.

  • Walter Sobchak

    I am not concerned. City councils have no jurisdiction over Federally supervised banks.

  • Brendan Doran

    Progressivism is the longest and most torturous road to socialism….

  • Joe Ynot

    Actually, the Mayor and other prominent NYers have decided that NYC has another industry: high tech, specifically software development.

  • PacRim Jim

    JP Morgan earned $19 billion in profit in 2011, so what does it matter that they lost $2 billion on a risky investment? They still are fantastically profitable. Just where do you suppose those profits are invested and spent?
    People of New York, you don’t deserve JP Morgan. You are unworthy of survival, evidently.

  • Some Sock Puppet

    This is the same group of people that allowed Bloomberg to get around term limits, ban salt, put together a coalition of criminals to ban firearms in other states, let the police adopt agressive tactics, ban salt, and shake down practically everyone he doesn’t agree with.

    None of that stopped 57+ people from being shot at the west-indian parade weekend last year, and the snow-removal sanitation debacle a year prior to that, nor Zucotti park and that mass demonstration of lunacy.

    But nanny knows best, so it’s all good.

    When he’s not busy telling NY’ers what to do, he’s traveling to other states to do so and vioating federal law to drum up any controversy he can.

    A local paper in North Carolina quoted him as saying to UNC graduates that there’s a long way to go on civil rights based on NC’s ban of same-sex marriages, and that the students should use the universities motto of “Liberty and Light” as their guiding principles in the future. He then added, “Unless you poopie-heads want guns, then you should be flogged in public and locked in a prison.”

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