Lisa Chow is the economics reporter at WNYC. She tries to explore in her stories surprising aspects of New York’s many economies—in plain view or hidden, in neighborhoods or sectors.
New York, NY –
Today the Senate begins debate on amendments and possible passage of new rules for Wall Street -- and anything that affects Wall Street ultimately affects New York because the city and state rely heavily on profits from the financial industry.
The push for financial reform puts both Democratic Senators from New York in a tricky spot. Some of their biggest campaign contributors work on Wall Street. That could be why neither Senator is going out of his or her way to talk about financial reform. Sen. Charles Schumer’s office never returned WNYC’s request for an interview on the proposed bill. And Sen. Kirsten Gillibrand’s office said she was unavailable, the same day she attended a fundraising event on Park Avenue hosted by bankers. So WNYC caught up with them at a gathering of constituents in Brooklyn this weekend, where Schumer talked about health care.
Schumer knows the issues facing Wall Street better than most Senators. He sits on the Senate banking committee, which wrote the bill that's currently being debated in Washington. Later, when asked whether the proposed overhaul would hurt the city’s economy, Schumer said, without hesitation, no.
"Too many Wall Street firms had no one looking over their shoulder," the Senator said. "They went off the deep end and thousands of people lost their jobs. The idea of the reform we're pushing is strong and forward-looking but not punitive and vindictive, and it will strengthen New York's financial system and strengthen jobs and income in New York."
Gillbrand didn’t mince words either.
"This is a very important issue and it’s one where there’s enormous divisiveness in the debate, but I will tell you the worst thing for New York State and New York City is another financial implosion," she said.
Gillibrand says the bill will lead to greater oversight and accountability of Wall Street, reduce risk in the system, and help New York rebuild a stronger and better financial industry.
Officials whose budgets are tied directly to Wall Street profits have expressed a different view. Last month, Mayor Michael Bloomberg said any regulation that limits bank profitability could hurt the city's economy, because the industry generates 40 percent of the city's income taxes.
"This is the way you eat," Bloomberg said.
The mayor opposes those parts of the bill that limit the size of banks and ban the practice of so-called proprietary trading, when banks use their own money to make bets on the market.
"Banning it would not stop it but only send those jobs to London, or Geneva, to Shanghai," Bloomberg has said.
Gov. David Paterson has also defended Wall Street.
"What we have to understand in New York is that Wall Street is to our state what grapes are to California, what automobiles are to Michigan, and what oil is to Texas. Twenty-two percent of our revenues are derived from Wall Street profit," Paterson said recently.
Restrict Wall Street profits, the governor says, and you restrict the state's economy.
New York's financial industry has lost about 45,000 jobs from its peak in 2008 to the end of last year. Brian Gardner, a political analyst for the investment firm Keefe, Bruyette and Woods, says whatever passes in the Senate will probably slow job growth in New York City for a little while. "What a lot of the legislation does is it prevents Wall Street from growing back to where it was," Gardner says.
But with all the anger directed at Wall Street, maybe that's a cost the two Senators are willing to accept for now.