Even after the financial crisis, Wall Street is still the dominant economic force in New York, accounting for 20 percent of the state’s tax revenue prior to the recession—and this is not even counting the multitude of businesses that have sprung up to support the financial sector and its employees.
Yet in the wake of JP Morgan’s massive losses last week and the continuing controversy surrounding the Wall Street bailouts, the New York City Council is debating a measure that would require city banks to publicly disclose their efforts at “socially responsible” banking. According to the New York Times, the new requirements would encourage banks to provide more services in disadvantaged city neighborhoods. The bank’s performance in these areas, in addition to the usual considerations of fiscal soundness, would then be taken into consideration when determining where the city will deposit its money, to the tune of billions of dollars.
Many bankers, as well as Mayor Michael Bloomberg, have voiced their opposition to the new plans. The regulations, they say, would add another burdensome layer to the web of regulations that already exist at the federal and state levels. The Council, however, appears unmoved, and support of key council leaders, including mayoral candidate Christine C. Quinn, give it a fighting chance at making it into law.
If it does, its supporters on the Council will hail it as a major victory, but it will be a loss for the city as a whole. The financial industry is the one industry keeping the city alive, yet New York’s blue politicians seem unconcerned about the risks of antagonizing their major cash cow. There have already been signs that banks are beginning to move what business they can to greener pastures with lower taxes and less regulation. More legislation like this, and that trickle could become a flood.
The economic case for banks moving their headquarters out of New York is strong enough as it is. Fortune 500 countries have been decamping for decades, and as manufacturing also died, the financial industry took up the slack. There is nothing on the horizon that could replace this industry as the mainstay for the New York economy. The City Council, one of the nation’s less effective and credible legislative bodies, will now do what it can to accelerate the city’s decline.