Why the Preemptive Break Up of Financial Institutions Would Be Bad for New York -- and America

(Kathryn Wylde sent this letter to the New York Congressional Delegation on November 11, 2009).

Dear Members of the New York State Congressional Delegation,

The Partnership for New York City is an organization of business leaders who are committed to the continued success of the city and state economy. We are writing because we know you share this commitment and that you are working to develop policies that will lead us toward economic recovery and full employment.

In that regard, we want to alert you to proposed legislation that could diminish America's standing as a preeminent, global financial center and inflict particular damage on New York. This is the call for the preemptive and arbitrary break up of large, complex, and interconnected financial institutions. Enacting such a provision would give foreign competitors the opportunity to capture market share among the world's largest corporate and investor clients -- those that demand the huge capacity and global reach that only our biggest U.S. banks have. We cannot afford for proposals like this to make it into the financial reform package and we hope every member of the delegation will make it their business to oppose them.

The "FIRE" sector -- finance, insurance, and real estate -- is particularly important in New
York. It produced more than $363 billion in economic output in 2008, accounting for 31.7% of New York's Gross State Product, and currently employs 684,100 people statewide. The securities industry has the greatest impact, with every Wall Street job responsible for creating or maintaining 3.3 additional jobs in other sectors. In terms of taxes, financial services represents 20% of the state and 12% of the city tax revenues.

The global finance industry, with companies and top talent that could locate anywhere in the world, is heavily concentrated in New York, with benefits that reverberate across the country. To retain its position as a global financial leader, the U.S. needs institutions of all sizes, business models, and expertise. For a global city like New York, large, multinational institutions are what connect our local businesses, large and small, to markets around the world and attract foreign companies to come to New York to raise capital and generate jobs. (One out of nine employed New Yorkers works for a foreign company.)

Reform of America's financial regulatory framework is essential. There are plenty of ways to achieve reform and reduce risk and taxpayer exposure without destroying institutions that are the anchors of our global financial center. We hope you will work with us to distinguish useful reform from overkill reactions.

Thank you for your consideration.

 

Comments

[BigGuy]

I disagree with the Partnership for New York City's perceptions and conclusions about the financial services industry. Bigger is not necessarily better, but it is ultimately riskier. The Partnership assumes that a financial supermarket bank for corporations will be more competitive and less risky than separate commercial and investment banks. Our immediate past experience disproves that assumption­..

[anfractuous]

And even worse, consider the plight of the velvet rope manufacturers. If we don't preserve the grotesque income disparity prevailing in this city, there won't be any way to determine who to keep out of overpriced restaurants and clubs! And think will you, of the window washers. What will they do when there is no one living in the ubiquitous glass monstrosities that blot out the sun and destroy middle class neighborhoods? Not to mention the nannies, personal trainers and the botox industry.

[bobwalters]

This letter, and its appeal, is the absolutely BEST argument for breaking up the too-big-to-fail financial institutions, imposing stringent regulations and controls over the F*I*RE sector, and moving away from a finance capital economy. Anything the rentier/vulture capitalist/ruling class wants should be the opposite of government policies if the US is ever to reduce/eliminate the militarist­/corporati­st/Goldman Sucks domination of our imperialis­t-oriented society.