NYC's Status As #1 Financial Center Slipping

Boy, oh boy, don't drink the cool-aid and buy the lie that "NYC's status as the world's top financial center is slipping"! --It's all bullcr*p propaganda cooked up by "Reverse-Robb'in Hood" Bloomberg & "Give to the Richest" Schumer to end public oversight and regulation on Wall St.

Wall St. has never been better! It's another Repub-li-cat lie. No wonder Bloomie's hangin' out with Bush today. Read this...and don't buy what they're selling!

The New Yorker

THE FINANCIAL PAGE

OVER THERE

Issue of 2007-02-05

Posted 2007-01-29

These look like fat years on Wall Street. In 2006, the city’s biggest financial firms made more than thirty billion dollars in profits. Trading volume on the major exchanges is climbing, while the merger market is booming. And bankers and traders have reaped the benefits, earning close to twenty-five billion dollars in bonuses last year. Yet over the past few months, amid this bounty, a chorus of Cassandras has emerged. “The United States is losing its leading competitive position,” a private-sector commission on capital markets said in a November report, and last week Mayor Michael Bloomberg and Senator Charles Schumer released a study arguing that New York City’s financial dominance was being eroded, thus putting tens of billions of dollars and tens of thousands of jobs at risk. These reports argue that overzealous regulation—as epitomized by the Sarbanes-Oxley Act, the anti-fraud law passed after the Enron and WorldCom scandals—is making the U.S. an increasingly unalluring place to do business. Unless such regulatory excesses are curbed, they say, New York will soon lose its position as the world’s financial capital.

What the New York report calls “the most dramatic illustration” of this slide toward disaster is a statistic that may seem rather esoteric: in recent years, the number of foreign companies choosing to go public in New York has plummeted, with Europe and Asia snapping up much of the business. America’s share of so-called “global I.P.O.s” is now only a third of what it was in 2001, and in 2005 twenty-four of the world’s twenty-five biggest I.P.O.s were held abroad. In other words, foreign companies, wary of our arduous regulations, are supposedly shunning America. And this signals a grim future, in which foreign firms stay away and, eventually, American companies may abandon the New York Stock Exchange and Nasdaq to list their shares elsewhere.

To businessmen weary of compliance officers and internal controls, this seems like a compelling narrative. But it’s a radically oversimplified explanation of what’s been happening. To begin with, many of the world’s biggest I.P.O.s in recent years have been privatizations of state-owned companies in Europe and China, which for political reasons were never likely to happen in the U.S. Also, corporate executives prefer to take their companies public in bull markets, which improves their chances of getting a high price for their shares, and foreign markets have lately done better than the U.S. market. London and Hong Kong are also cheaper than New York: the commissions that investment banks charge to take companies public there can be about half what they are in the U.S. More broadly, globalization—a force that Wall Streeters applaud when it comes to textile plants and call centers—has increased competition. Many foreign exchanges, like Hong Kong’s, are now far more liquid and open, and they also have much tougher regulations (often modelled, ironically enough, on those of the U.S.) than they once did. All this has made investors more willing to invest in them. Their market share has naturally increased as a result, particularly since, even in a global economy, companies prefer to list their shares closer to home.

Once you control for these factors, it becomes hard to find anything other than anecdotal evidence that regulations are doing serious damage to New York’s ability to attract foreign I.P.O.s. More important, it’s far from clear that a decline in foreign I.P.O.s would be a sign of future disaster anyway. After all, what matters to the fundamental health of an economy is its ability to attract capital and investors, not foreign listings. And there is no evidence that America’s attractiveness to investors has diminished. Its share of global stock-market activity in 2005 was actually three points higher than it had been a decade earlier. In the same period, the market capitalizations of the New York exchanges rose almost twice as fast as the market cap of the London Stock Exchange. And, according to the New York report, if you look at the annual growth in equities—which is what Sarbanes-Oxley would presumably be a drag on—you find something unexpected: from 2001 to 2005, the U.S. market grew significantly faster than that of Europe or the U.K. Does that really look like an industry crippled by regulation?

There’s no doubt that Sarbanes-Oxley is an imperfect piece of legislation, but it is not a harbinger of doom for America’s capital markets, and we should be skeptical of any analysis that says it is. Wall Street, after all, has greeted practically every important market regulation introduced in this century with howls of dismay and predictions of disaster. In 1934, the head of the New York Stock Exchange told Congress that if the Securities Exchange Act, which became the foundation of market regulation in the U.S., was made law there was a chance that stock trading in the U.S. would be “entirely destroyed.” Needless to say, it wasn’t. In 1975, when the S.E.C. abolished fixed commissions, the Street claimed that its business would be demolished. Instead, after transaction costs fell, trading volume shot up. And in 2000, when the S.E.C. required companies to disclose material information to all investors, rather than just to insiders, we were told that this would strangle the flow of information to the market and make stock prices swing wildly. But, as numerous academic studies have found, it has actually done the opposite. Maybe this time the doomsayers are right. But we need a lot more proof than we’ve been shown so far to believe that the wolf is really at the door.



— James Surowiecki

Daniel Gross pointed out something during Brian Lehrer's show today that I didn't know: NYC financial firms take a 7% cut of every IPO they do. Financial firms everywhere else in the world charge only 3%. Think that might have something to do with NYC's declining market share in financial services?

ben, if I could harness the power of the rhetorical gems that you fall out of your mouth I could raise a cult that would make Islam look like a high school drama club. Stay classy.

ben, if I could harness the power of the rhetorical gems that you fall out of your mouth I could raise a cult that would make Islam look like a high school drama club. Stay classy.

"All those countries we helped stand up now want a shot at the throne."

Actually they just want to take a shot AT US. And if by "throne" you mean "toilet bowl", then you're RIGHT.

I hope they don't forget to flush.

NYC's livability is declining? What are you using a reference point? Having grown up in the 90's, I can tell you New York is worlds beyond that bloody era of crack wars, grime and population decline.

Hail britannian and Britannian Jeans.

I'm having a drink all right. If anything, NYC is the capital of a-holes and shitheads.

See Will excel.

Sar-ox is much more than a first year issue. Companies will not list in the US if they are subject to section 404. Ironically (and unfortunatly), the beneficial effects of sar-ox are more apparent than actual.

America has lost the advantage. Gone are the post war days where our industrial might supported the shattered world on our broad shoulders. All those countries we helped stand up now want a shot at the throne. And they deserve it. We've lost our ambition. The country is filled with ben dover and his fat, wal-mart shopping companion on the other side of the isle. I suggest you have a drink and watch the dream die.

Well, as of like right NOW we're already no longer the world's center for Human Rights, Democracy, Civil Liberties, Freedom of Speech, Fair Play nor Justice.

It's all just part of the LOOONG ride DOWNHILL we're taking thanks to G.W. Bush ..mein Fuhrer and yours.

Well, as of like right NOW we're already no longer the world's center for Human Rights, Democracy, Civil Liberties, Freedom of Speech, Fair Play nor Justice.

It's all just part of the LOOONG ride DOWNHILL we're taking thanks to G.W. Bush ..mein Fuhrer and yours.

Kojak, London has amusing labor laws that warn people of impending layoff, among other things. That's why a lot of IT is moving to Singapore.

Many financial companies are keeping the Business in NYC or London and IT in Singapore. Works Horribly when local infrastructure goes down, but the Jackasses in upper management think they saved a dime...

NYC is falling behind because our Mayor and city fathers don't give a crap about quality of life and urban environment. NYC is increasingly unlivable while other world cities are getting better every day. Get a clue, Bloomy and Chuck.

The whole Sarb-Ox thing is a myth. The high cost for companies was mainly a first year issue. The new Congress can tweak the law to help out small companies. The fact remains that many of the companies listing in London would never have passed scrutiny here, even in 1999. Internet gambling and the opaqueness of some of the Russian companies are just a few types.

And you'll never convince me immigration is holding back New York finance. There should be no shortage of talent here. It's not like you need skills to get ahead on Wall Street. Most of thes people got an easy BA from an Ivy League school, put in a few years as an analyst so they could get into a top MBA program. And a AP Calculus student can do the math required of an MBA.

Heavens forbid the US actually has a city that isn't all what it's cracked up to be. The entire concept of "Stockholders" has proven to accomplish nothing for mankind in general, and has only contributed to further trash-culture-woes. Ie, go out and rent "Wall Street" and tell me I'm wrong.

Some of the things which are eroding New York's status are beyond the city's or state's control. Immigration restrictions and Sarbanes-Oxley, to name two things, are federal laws and only Congress can ease them.

I don't think so Matty. London is already the largest foreign exchange market in the world, and they are catching up with New York in every category very quickly. They aren’t held down by red tape as the American Financial markets are.

This is a problem that needs to be addressed. New York can easily stay number one, but we need to loosen up to attract more capital. The Talent and infrastructure is already in place, so I don't see why we can't hold on to the top spot.

Oh yes, tort reform - let them steal all they want, and maybe they'll stay! (and, of course, they'll have more money to spend on Bloomberg terminals).

i don't think companies like bear stearns and goldman sachs are going anywhere. besides ny is better than london in so many ways. I think it's kind of a silly thing to worry about.

More old news.

Since the growth centers of the world are not in North America it is only logical that other cities would see their financial services industry grow. Asia and Eastern Europe are where it's at. London is a more ideal place for Eastern European companies to list their shares.