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United States Senator Charles E. Schumer and New York City Mayor Michael R. Bloomberg have released a report which warns that New York could lose its status as a global financial market within a decade without a major shift in public policy.
Schumer, a New York Democrat, and Bloomberg, together with New York Governor Eliot Spitzer, warned that New York's financial markets, stifled by stringent regulations, and high litigation risks, are in danger of losing businesses and high-skilled workers to overseas competitors, relegating New York to regional market status and adversely impacting the US economy.
Schumer and Bloomberg, with the backing of Spitzer, have unveiled a plan which they claim will revitalize US financial markets and reaffirm New York's position as the financial capital of the world. If implemented, these recommendations would: provide clearer guidance for implementing the Sarbanes-Oxley Act; ease immigration restrictions facing skilled non-US professional workers; promote convergence of accounting and auditing standards; implement the Basel II Capital Accord; modernize financial services charters and holding company structures; and form an independent, bipartisan National Commission on Financial Market Competitiveness to resolve long-term structural issues, among other measures.
"If New York goes from being the financial capital of the world to becoming only a regional market, as this report predicts will happen within the next ten years, every aspect of New York life will suffer, not just financial services," Schumer stated. "The fact that Eliot Spitzer has joined us shows a united New York front in fighting hard to keep us where we should be, as number one."
"Let's be clear: The financial services industry is one reason that the 20th century was the American century and that New York became the world's capital," said Bloomberg. "We've outlined a range of practical yet innovative steps to ensure the 21st century is just as bright. This is one of many challenges to our long-term economic health and stability that require we move beyond partisanship to find solutions."
"The financial markets are a cornerstone of New York State's economy yet, as the study illustrates, we are in danger of losing our pre-eminence as the financial center of the world," added Spitzer. "We must take these recommendations seriously so as to support an economic climate ripe for financial services while continuing efforts to safeguard the market for investors. I applaud Senator Schumer and Mayor Bloomberg for their visionary leadership and look forward to working with them."
"If we don't address these problems now, New York is in danger of becoming a secondary city instead of the world capital it deserves to remain," concluded Deputy Mayor for Economic Development, Dan Doctoroff. "This report demonstrates what we suspected - the impact to our economy will be severe and the job cuts and financial toll painful."
Senator Schumer and Mayor Bloomberg commissioned the joint report, "Sustaining New York's and the US's Global Financial Services Leadership," which sets out a series of recommendations to counter emerging threats to the United States' position as the world's financial leader, with a two-tiered package of national and local measures aimed at removing impediments to financial services competitiveness both domestically and internationally.
The report warned that the United States would miss out on between $15 billion and $30 billion in financial services revenues annually by 2011 if the current situation goes unchanged.
According to the joint report, while many of the causes are due to improved markets abroad and sophisticated technology that has virtually eliminated barriers to the flow of capital, a significant number of the causes for America's declining competitiveness are self-imposed. For instance, US-based financial services firms are now unable to attract and retain many of the highly-skilled professionals they need because of caps on the number of visas available under US immigration rules. A greater perceived litigation risk has also reduced the appeal of the US market to many foreign firms, the report's authors said.
The report also noted that a complex and sometimes unresponsive regulatory framework has not only prompted many foreign firms to stay out of the US markets, but also is forcing more business overseas because of the complexity and cost of doing business in US financial markets regardless of where they are located.
The report's recommendations focus on a number of short-term administrative actions that would signal renewed US focus on competitiveness, actions to level the playing field for both domestic and foreign companies doing business in the United States. Longer-term initiatives would address more complex policy, legal, regulatory and other structural issues affecting the US position as the world's leading financial center.
Identifying access to skilled professionals, a fair and predictable legal environment, and a responsive, market-oriented regulatory framework as top determinants of financial services competitiveness, Bloomberg and Schumer called for a coordinated, non-partisan implementation effort to improve America's performance along each of these dimensions and thereby strengthen the third-largest sector of the US economy. Forming new public-private partnerships at the city and national levels to tackle these issues is an underlying theme of the joint report.
Bloomberg emphasized that policymakers must avoid complacency about New York's long-term future as a world-leading financial center. "Our capital markets and financial services firms will only enjoy continuing growth - growth that our city expects, needs and demands - if we take seriously the challenges from rapidly-expanding competitors in Europe and Asia," said the Mayor.
Senator Schumer pointed out that strong financial markets are crucial to the health of both New York's economy and the nation's; financial services drive 8% of US GDP, and create more than 5% of all jobs nationwide.
"This is not simply a New York issue," the Senator said. "Seven states, including New York, have more than 10% of their state's GDP derived from financial services, and strong financial services are important to everyone regardless of where they reside or do business.".
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