Friday, July 31, 2009
As Chris Dodd and his cronies have massed on the ridge, prepared to mow down the reckless "culture of greed" that got us into this recession mess, few have ventured to champion the industry that increasingly fed the coffers of New York. Privately, though, those responsible for keeping the lights burning on Fifth Avenue and for shoveling up after the mounted police have watched in horror at the meltdown of investment banking profitability. Consider that fully 20% of New York State tax revenues and 12% of the city's income stemmed from the securities industry. Governor Paterson has noted that Wall Street has "bailed us out for a number of years" while state legislators spent beyond their means. Baldly put, New York thrives on a healthy Wall Street.It is as if "this is the way it has always been, and this is the way that it shall always be".
Not only are banking profits essential to the well being of New York, those pesky bonuses play a vital role as well. Wall Street payouts peaked at more than $30 billion in 2006, generating billions in revenues for New York, New Jersey and - yes! - even Chris Dodd's home state of Connecticut. Not only did those banking employees trundle home with mountains of bacon, but they were joined by legions of hedge fund and private equity types who also cashed in big time in recent years. Last year's drop in banking bonuses cost New York State almost $1 billion in tax revenues, while the city saw $275 million go up in smoke.
The notion of fundamental changes to our finance-based economy, an economy that is clearly unsustainable, are not even on the radar screen.