January 21, 2008

A reason to worry about New York City

As financial institutions keep reporting staggering losses, the strongest financial engine of the state is looking pretty wobbly:

Now, economists and city and state officials are acknowledging that 2008 could turn out to be far worse than their already dampened expectations....

Announcements last week from Citigroup and Merrill Lynch that each had lost nearly $10 billion in the last three months of 2007, their biggest quarterly losses, signaled that the fallout from the cratering of the market for risky mortgages could be worse than anticipated.

Merrill, the nation's biggest brokerage firm, said it had already eliminated about 1,000 jobs, and Citigroup said it planned to cut about 4,000. Bank of America announced that it would cut an additional 650 jobs in its investment bank, which eliminated 500 jobs a few months ago.

Analysts said they expected more job cuts on Wall Street as the big banks continued to contract in the wake of the mortgage crisis. But early projections of how many jobs will be lost and the effect of those losses on the region's economy are being overtaken with each new piece of bad financial news....

In releasing a report last week on declining Wall Street bonuses at the end of 2007, Thomas P. DiNapoli, the state comptroller, noted that collections of personal income taxes in the city and state had remained strong so far. "But the future is not so bright," Mr. DiNapoli said. "The losses sustained in the securities industry during the second half of 2007 are a fairly clear indicator that tax collections, especially from business taxes, will erode in 2008."

One selfish reason downstate might want to see Upstate prospering is to help everyone avoid the gigantic swings in state tax collection caused by our over-reliance on New York City's being a financial hub.

Posted by simon at January 21, 2008 3:26 PM in , ,
Note on photos