Losing NY’s golden goose (Wall Street is never bouncing all the way back)

New York Post ^ | 10/12/2012 | Nicole Gelinas

[SeekAndFind]

Five years after the beginning of the financial crisis,” Wall Street “remains in transition,” state comptroller Tom DiNapoli reported Tuesday. The industry is “still working through the fallout from the financial crisis.” No kidding.

Yet both the state and city governments, which depend on Wall Street to pay the bills, are still partying like it’s 2007. Unless they sober up soon, they’re in transition to nowhere.

At first glance, DiNapoli’s report on Wall Street’s impact on New York seems inconsistent. Wall Street should ink healthy profits this year — $15 billion, or twice last year’s levels. That’s back to where it was in 2006, before the crisis.

But Wall Street is shedding jobs — 4,800 over the summer.

And the industry never replaced the jobs it lost after 2007. Employment is still down 20,200 jobs since the crash, to 172,000 — a much slower bounce-back than after the last two recessions.

In 2000, keep in mind, Wall Street had 195,400 jobs — a number it’s never again reached.

Bonuses are falling, too, for the second year in a row — even though last year’s $20 billion was about 43 percent below the pre-crisis payout.

The numbers make sense, though — and are grim news for New York.

Profits are the difference between what the Wall Street firms take in — “revenues” — and their expenses. And revenues are still nowhere near the 2006 or 2007 level — in fact, they’re about 57 percent below the 2007 mark, and still falling.

So to keep profits high, Wall Street has slashed its biggest expense: jobs, and pay for those who still have jobs.

This trend is getting worse.

[SeekAndFind]

A NOTE ABOUT JOBS:

Morgan Stanley chief James Gorman said last week, “there’s way too much capacity” — meaning extra people — “and compensation is way too high.” Still. “The industry is still overpaid.”

And Gorman and his Wall Street peers have also figured out that their employees have nowhere to go if they’re unhappy.

So look out below — still. In the early ’80s, the average Wall Streeter made only twice the average private-sector income in other industries. It rose to six times that during the bubble years — but it’s now back to five times the average salary, and sinking.

[SeekAndFind]

AND NOTE HOW IT AFFECTS NEW YORK’s BOTTOM LINE:

In 2008, Wall Street covered about $4.5 billion of the city’s tax payments — 12 percent of the total. Last year, it was $2.8 billion — 7 percent.

The state, meanwhile, got $8.7 billion from the securities industry last year, or 14 percent of its tax dollars. That was down from $12 billion — or 20 percent — in 2008. (The state numbers are bigger because Albany relies so heavily on income taxes.)

[Vince Ferrer]

Many financial jobs are relocating outside New York as well.

[Dr. Thorne]

Well, golly duh. Here are the reasons that Wall Street is in trouble:

1. $228 Trillion in derivative exposure by the big banks

2. High speed trading that no human can match

3. Banks with Prop Trading Desks that make bets opposing the advice they've given to their investors

4. Lack of trust by investors after recent crash

5. No one wants to risk what they have left.

[Doctor 2Brains]

Revenue is DOWN 57%, and profits are UNCHANGED! Sounds like there are some seriously talented people in charge of this industry.

[Chode]

computer trading requires no bonuses... maybe a few for the programmers though

[OrangeHoof]

I don’t know if Wall Street is never bouncing all the way back but until the area shrinks their high-tax nanny-state governments, there will be a lot of outstanding minds who will never choose to work there.

[Lonesome in Massachussets]

Milton Friedman in his 1972 book, “Free to Chose” pointed out that in 1950 well over half of all Fortune 500 companies were headquartered in New York City, but by that time, it was down to less than 200, and falling. As he put it, New Yorkers, who believe in redistribution, redistributed jobs and industry to the rest of the country. New Yorkers never learned their lesson, they still insist on killing the geese that lay the golden eggs.

But, in this, they are a lot like other Americans.

[SaraJohnson]

They killed the golden goose with a bunch of scamming and distortions. The world is on to the “leading” economy.