Rules Harm U.S. Fiscal Markets, Report Says
Tuesday, January 23, 2007
Cumbersome securities regulation and immigration restrictions are diminishing the importance of the nation's financial markets, according to a report by consulting firm McKinsey & Co. released yesterday.
New York City Mayor Michael R. Bloomberg (R) and Sen. Charles E. Schumer (D-N.Y.), who commissioned the report, warned that the country's financial markets would be reduced to a mere regional financial center within a decade if certain government rules are not relaxed.
The report said there is "an urgent need for concerted but balanced action" at the national, state and local levels to enhance the competitiveness of the U.S. financial markets and "defend New York's role as a global financial center."
The report, "Sustaining New York's and the U.S.'s Global Financial Services Leadership,'' is one of several studies conducted as concern grows that the nation is losing its standing as global leader in finance. The report is based on interviews with more than 50 chief executives in the financial services industry and online surveys of hundreds of senior executives. The consulting firm also spoke with investor, labor and consumer groups.
Some are skeptical of the notion that the United States is losing its financial edge. "Financial regulation may scare some businesses away, but for many investors, it offers an extra measure of protection that makes it a competitive plus," said Amy Borrus, deputy director of the Council of Institutional Investors. "At a time when Wall Street firms are doling out platinum-plated bonuses, it's hard to believe New York could be losing its ability to attract and keep skilled financial professionals."
According to the report, Europe is gaining on the United States in revenue from the lucrative investment banking and trading businesses. The U.S. exchanges' share of initial public offerings has dwindled while those of its European and Asian counterparts have jumped. Europe's revenue from derivatives already trumps that of the United States.
At a news conference yesterday in Manhattan, Bloomberg and Schumer noted that the issue extends beyond New York and the financial services industry. Bloomberg and Schumer were bolstered by the presence of New York Gov. Eliot L. Spitzer, who as the state's attorney general made headlines going after corporate giants on Wall Street. One out of every nine people in New York City and one out of every 19 people in the country are employed by the financial services sector, the report said.
The 145-page, $600,000 report emphasized immigration policy as a potential threat to New York City's high-quality workforce. U.S. immigration laws, such as caps on H-1B visas for skilled workers, are making it harder for foreigners to move to the country, the report said. While London's financial services sector grew by 4.3 percent from 2002 to 2005, New York City's fell by 0.7 percent, a loss of more than 2,000 jobs.
The McKinsey report made a number of recommendations, ranging from easing immigration standards for skilled foreign workers to looking into the creation of an international financial services zone in New York that would offer tax incentives to businesses.