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New York Takes A Hit On Financial Stage

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The Associated Press

Published: December 20, 2008

NEW YORK - For the hundreds of camera-toting tourists who visit Wall Street every day, the New York Stock Exchange presents an imposing sight.

The building-size American flag draped over the exchange's towering Corinthian columns. The sculptures on the facade that symbolize the prosperity of a capitalist nation.

These icons mark Wall Street as a site of business and a symbol of the risk-taking and success that have spurred American global dominance and helped shape its identity.

But with the nation's top investment houses shuttered, sold or changing into staid commercial operations, doubts have emerged about whether the city that for generations has been known as the world's financial capital can retain that title - or the daredevil swagger that has defined Wall Street for so long.

It is a transformation that some say was under way long before the meltdown of 2008.

"It's going to be a long, slow process and take many years for us to really restore our leadership in the world," said Ron Chernow, who has written extensively on the history of Wall Street. "New York has been damaged, and some of it, I think, is permanent."

First, Bear Stearns nearly collapsed and was bought by JPMorgan Chase in a deal backed by $29 billion in federal money. Then Lehman Brothers filed the biggest bankruptcy in U.S. history and the British bank Barclays swept in to buy up key units of the firm. Goldman Sachs and Morgan Stanley opted to become commercial banks. And even Merrill Lynch & Co. announced its sale to an out-of-town commercial bank, North Carolina-based Bank of America. Citigroup has been crumbling daily.

At the same time, places such as London, Tokyo and Hong Kong have become global financial centers on a scale that some think already rivals New York.

The New York Stock Exchange still far outweighs the London Stock Exchange - with the value of shares traded at the NYSE in 2007 nearly triple the $10.33 trillion traded in London.

However, the financial sway of cities such as London has been growing faster than New York's. From 1997 to 2007, the new capital raised yearly in New York dropped by nearly one-quarter - while in London the figure almost quadrupled, the World Federation of Exchanges says.

A loss of status in the world of finance could hurt New York on many levels. Money is stored here, higher-income jobs come here. This creates tax revenue and supports a higher quality of life, as businesses and cultural activities - which themselves attract visitors - spring up to support these workers, said Richard Sylla, a curator at the Museum of American Finance.

Last year, 11 percent of the city's employees worked in the finance and insurance industries, but they made nearly 40 percent of the city's income.

"When you think of Wall Street ... one has an image of these very freewheeling, razzle-dazzle, buccaneering kinds of firms," Chernow said. "That style of business is now history."

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