The report provides detailed analyses of market conditions here and abroad, informed by interviews with more than 50 respected leaders drawn from the financial services industry, consumer groups, and other stakeholders. The findings are quite clear: First, our regulatory framework 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.
Dear Fellow Americans,
The 20th Century was the American century in no small part because of oureconomic dominance in the financial services industry, which has always beencentered in New York.Today, Wall Street is booming, and our nation’s short-term economic outlook isstrong. But to maintain our success over the long run, we must address a realand growing concern: in today’s ultra-competitive global marketplace, more andmore nations are challenging our position as the world’s financial capital.
Traditionally, Londonwas our chief competitor in the financial services industry. But as
technology has virtually eliminated barriers to the flow of capital, it nowfreely flows to the most efficient markets, in all corners of the globe. Today,in addition to London, we’re increasingly competingwith cities like Dubai, Hong Kong, and Tokyo.
The good news is that we’re still in the lead. Our financialmarkets generate more revenue than any other nation, and we continue to be hometo the world’s leading companies, which help form the backbone of our nationaleconomy. In fact, for every 100 Americans, five work in financial services –and these jobs are not just in New York and Chicago. In states asdiverse as Connecticut, Delaware,South Dakota and North Carolina, the financial servicesindustry employs major portions of the workforce.
All Americans have a vested interest in strengthening America’s financialservices industry, and the time has come to rally support for this effort. Tostay ahead of our hard-charging and dynamic international competitors, and toensure our nation’s long-term economic strength, we can no longer take ourpreeminence in the financial services industry for granted. In fact, the reportcontains a chilling fact that if we do nothing, within ten years while we willremain a leading regional financial center; we will no longer be the financialcapital of the world. We must take a cold, hard look at the industry,identifying our weaknesses, learning from the best practices
of other nations, and drawing upon strategies that will allow us to adapt tothe changing realities of the market. That is exactly why we commissioned thisreport.
The report provides detailed analyses of market conditionshere and abroad, informed by interviews with more than 50 respected leadersdrawn from the financial services industry, consumer groups, and otherstakeholders. The findings are quite clear: First, our regulatory framework isa thicket of complicated rules, rather than a streamlined set of commonly understoodprinciples, as is the case in the United Kingdom and elsewhere. Theflawed implementation of the 2002 Sarbanes-Oxley Act (SOX), which produced farheavier costs than expected, has only aggravated the situation, as has thecontinued requirement that foreign companies conform to U.S. accountingstandards rather than the widely accepted – many would say superior –international standards. The time has come not only to re-examineimplementation of SOX, but also to undertake
broader reforms, using a principles based approach to eliminate duplication andinefficiencies in our regulatory system. And we must do both while ensuringthat we maintain our strong protections for investors and consumers.
Second, the legal environments in other nations, including Great Britain,far more effectively discourage frivolous litigation. While nobody shouldattempt to discourage suits with merit, the prevalence of meritless securitieslawsuits and settlements in the U.S.has driven up the apparent and actual cost of business – and driven away potentialinvestors. In addition, the highly complex and fragmented nature of our legalsystem has led to a perception that penalties are arbitrary and unfair, areputation that may be overblown, but nonetheless diminishes our attractivenessto international companies. To address this, we must consider legal reforms thatwill reduce spurious and meritless litigation and eliminate the perception ofarbitrary justice, without eliminating meritorious actions.
Third, and finally, a highly skilled workforce is essentialfor the U.S.to remain dominant in financial services. Although New York is superior in terms of availabilityof talent, we are at risk of falling behind in attracting qualified Americanand foreign workers. While we undertake education reforms to address the factthat fewer American students are graduating with the deep quantitative skillsnecessary to drive innovation in financial services, we must also address U.S. immigrationrestrictions, which are shutting out highly-skilled workers who are ready towork but increasingly find other markets more inviting. The European Union’sfree movement of people, for instance, is attracting more and more talentedpeople to their financial centers, particularly London. The United States has always been abeacon for the world’s best and brightest. But to compete with the growing EUand Asian markets—in a way that grows our economy and creates jobs across thenation—we must ensure that we make it easier for talented people to move to theU.S. to pursue education and employment.
We know that addressing these challenges, and ensuring thatwe do so in a way that continues to offer strong protections to consumers andinvestors, will not be easy. But other nations have succeeded in this effort,and so too must we. The industry will continue to experience rapid growth inthe 21st Century, which holds great promise for our nation – but only if wetake seriously our competitors, who are rapidly gaining ground. Failing to doso would be devastating both for New York City and the entire nation.
In the weeks and months ahead, we will work together toimplement the state and local reforms necessary to strengthen New York City’sposition as the world’s financial capital. At the same time, we will work withCongress, the Administration, regulators industry leaders, and other stakeholdersto take the necessary steps to ensure that America retains its dominantposition in the financial services industry in the 21st Century. It is our hopethat this report will call attention to the challenges we face in meeting thisgoal, and serve as a call to action for members of both political parties, andfor leaders of every branch of government.
Sincerely,
Michael R. Bloomberg
Charles E. Schumer
Click Here for a PDF of the Report
