Puffery

22 January 2007



New York Politicians Fear for City’s Financial Center Status

New York Mayor Michael Bloomberg and Senator Charles Schumer have released a report from consulting group McKinsey & Company that says New York’s status as “financial capital of the world” is under threat. In the usual manner of politicians who need some time on TV, the pair are holding a news conference this morning to whine that the rules in the US undermine the city’s ability to compete with places like London, Dubai, Hong Kong and Tokyo. They exaggerate.

According to New York One, a local news station owned by Time Warner Cable, “The report concludes that New York and the nation are losing the advantage because of three main factors:

  • The American regulatory framework, particularly the Sarbanes-Oxley Act, is ‘a thicket of complicated rules, rather than a streamlined set of commonly understood principles, as is the case in the United Kingdom and elsewhere.’
  • While New York offers a promising talent pool for its financial services work force, ‘we are at risk of falling behind in attracting qualified American and foreign workers.’
  • The legal environments in other nations ‘far more effectively discourage frivolous litigation’.”
The station also reported, “To reach its findings, the McKinsey team interviewed more than 50 CEOs and business leaders, and gathered information through surveys of more than 300 other leaders and senior executives.” Just the sort of people one would expect to complain about these kinds of things.

There is no doubt that compliance with SOX, as it is known, is a pain and an expense. It also provides for a transparency found nowhere else in the world. Hong Kong is renown for shady stock deals and odd manipulations. Moreover, it happens to be in a communist nation now, not part of the British Empire. As for London and Tokyo, they have always been competition for New York – one should accept it. And Dubai? It is a very exciting place at this juncture, and the regulations in place are thoroughly inadequate. It is just a matter of time before something bad happens.

If the Mayor and the Senator really want to ensure that New York stays at or near the top in global finance, they need to get Washington to balance America’s budget and impose some trade policies that fix the trade deficit. If that doesn’t happen, the dual deficits will undermine the US economy, and then, New York will wind up playing third or fourth fiddle. If a nation’s economy is significant globally, its financial center will be as well. However, a nation’s financial center can only be important if that nation’s economy is important. SOX and frivolous lawsuits matter less than having America’s financial and economic house in order.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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