Archive for November, 2008

DiNAPOLI REPORT: WALL STREET’S TRANSFORMATION WILL LEAD TO LOWER TAX REVENUES; CONTINUED JOB LOSSES

Wall Street’s Shift from Investment Banking Model Will Lower Industry Profits

The financial crisis could cost New York State and New York City 225,000 jobs and $6.5 billion in securities industry-related tax revenue over the next two years, according a report released today by New York State Comptroller Thomas P. DiNapoli. The Comptroller noted that the Governor and Mayor have been proactive in dealing with the crisis, but New York, like other states, may require federal assistance given the magnitude of the projected budget gaps.

“Wall Street is the engine that drives the economies of New York State and New York City, but the global credit crunch has slowed that engine down,” DiNapoli said. “This year is on pace to be one of the worst years ever on Wall Street. Through the first half of this year, broker dealer operations of New York Stock Exchange member firms reported a loss of nearly $21 billion.

“These numbers are translating into job losses. The securities industry in New York City has lost more than 16,000 jobs and the industry could lose a total of 38,000 jobs by next October, with another 10,000 jobs lost in banking, insurance and real estate. And those job losses translate into more job losses in other industries.

“The financial crisis highlights the need for greater transparency and oversight, but there has to be a balance. Overregulation could hurt the securities industry, which is vitally important to the State and the City.”

“This important report captures the substantial damage inflicted on New York by the collapse of global financial markets and underlines the importance of stabilizing the banking system in order to maintain our position as the world’s financial capital,” said Kathryn Wylde, president & CEO, Partnership for New York City.

Over the past year, the securities industry in New York City has lost 16,300 jobs. DiNapoli predicts the securities industry could lose a total of 38,000 by October 2009 and another 10,000 jobs could be lost in banking, insurance and real estate. The Comptroller estimates total private sector job losses could reach 175,000 in New York City but losses could be greater if the economic downturn is deeper and longer than currently forecast. In total, New York State could lose 225,000 jobs during this period.

According to DiNapoli, while top executives may not receive bonuses, lower level employees will still receive payments although the size of the bonus pool will be much smaller than in prior years. In the early 2000s, bonuses fell by 50 percent over a two-year period in the years following the bursting of the dot-com bubble and the events of September 11, 2001. According to the Comptroller, recent developments suggest that a decline of a similar or even greater magnitude could occur this time. By January of each year, the Comptroller issues an estimate of cash bonuses paid in the prior year.

“Top Wall Street executives ought to forego bonuses during this difficult time; it’s inappropriate to reward poor performance,” DiNapoli added. “But the public must keep in mind that bonuses paid to lower level employees are often used to purchase goods and services in other industries, which benefits the overall economy. New York will feel a lot pain from a shrunken bonus pool.”

The DiNapoli report also found:

• Broker/dealer operations of New York Stock Exchange member firms reported near record profits of $20.9 billion in 2006 but a record loss of $11.3 billion in 2007. These firms reported a loss of $20.7 billion in the first half of 2008 and New York City’s financial plan projects a loss of $25.5 billion for the entire year, but the Comptroller’s report warns that losses could be even greater.
• Securities industry revenues fell from $70.3 billion in the first half of 2007 to $32 billion in the second half of 2007. According to the report, total compensation averaged an unsustainable 97.4 percent of net revenues for the first half of 2008 (compared with an average ratio of 53 percent from 1990-2006).
• For the six largest securities firms headquartered in New York City, revenues fell by 63 percent in the second half of 2007 and by another 48 percent during the first three quarters of 2008. These firms reported write-offs of more than $140 billion during this period.
• As Wall Street contracts, the Comptroller estimates that jobs will be lost throughout the rest of the City economy due to the industry’s multiplier impact on jobs. DiNapoli’s multiplier effect estimates that for each financial sector job lost, two more jobs will be lost in other industries in New York City and 1.3 jobs will be lost elsewhere in the State.
• During the 2001-2003 recession, New York State lost 329,600 private sector jobs, of which Wall Street directly and indirectly contributed a loss of 173,500, or more than half of the decline. New York City lost a total of 232,100 private sector jobs during this period.
• The average securities industry salary reached a record high of nearly $400,000 in 2007 paying approximately 6.8 times the salary of all nonfinancial jobs in the City. Salaries averaged $150,640 in credit intermediation and insurance and $62,060 in real estate and related industries.
• Tax collections (personal income and business taxes) from Wall Street-related activities could drop by $4.5 billion for New York State and $2 billion for New York City by 2010. Wall Street activity generates a disproportionate share of State and City tax revenue because of high levels of compensation, profitability and capital gains.
• Wall Street-related activities account for 12 percent of New York City tax revenues and up to 20 percent of New York State revenues. Prior to the current crisis, the securities industry accounted for five percent of the City’s employment but nearly 25 percent of the wages.
• Hedge funds and private equity firms, which have also been hit hard by the crisis, play an important role in the securities industry and have a strong presence in New York City. According to a survey of large hedge funds and private equity firms conducted for the Comptroller by The Partnership for New York City, respondents leased nearly 1.5 million square feet of office space in New York City and paid more than $100 million in unincorporated business taxes to the City.

Click here for a copy of the report or visit http://www.osc.state.ny.us/osdc/rpt7-2009.pdf.

My View: Access to health care is a life-and-death issue for cancer patients

OPINION By Sandra Cassese

Would you recognize the face of the uninsured in America? It’s the 22-year-old recent college graduate who is no longer covered under a parent’s insurance plan, the 45-year-old professional who is between jobs and cannot afford high-priced continuation coverage, the single parents who can get government-backed insurance for their kids but make just too much salary to qualify themselves.

America’s broken health-care system is one of the largest obstacles to achieving victory over cancer. The people who need it most — nearly 46 million uninsured people — lack early and ongoing access to our nation’s health-care system, which studies have shown leads to poorer cancer outcomes. The failings of our health-care system directly contribute to needless suffering and death from cancer, which will kill an estimated 35,000 people this year in New York state. According to a recent Fiscal Policy Institute report, there were more than 46,000 nonelderly uninsured individuals in Orange County alone in 2006.

Fighting cancer is hugely expensive and can mean financial catastrophe for families with or without insurance. Almost half of uninsured cancer patients use up all or most of their savings fighting the disease. One in 5 patients who have insurance will face financial ruin in their battle with cancer. High costs and inadequate insurance policies cause nearly one-third of patients to skip or delay treatment for cancer.

Since lack of or inadequate health-care coverage has such a large impact on cancer survival rates and quality of life for those with cancer, the American Cancer Society is educating the public about the severity of the health-care crisis and its impact on real people. In the aftermath of a remarkable election, we need to make sure that health-care reform remains a top priority for the incoming administration. I challenge President-elect Obama to maintain the extraordinary level of commitment needed to push access to health-care reform over the finish line. Visit www.acscan.org to review where the presidents and newly elected state officials stand on cancer issues.

Cancer is potentially the most preventable and the most treatable of all life-threatening diseases. We have made tremendous progress in the fight against cancer, but we know not everyone is benefiting equally from those advances. Too many cancer patients are being diagnosed too late, when treatment is harder and more expensive and has less chance of saving lives. Screening tests and treatment that improves quality of life must be available to all.

Answers may be found in the private sector, the public sector or some combination of the two. The objective of the American Cancer Society’s public education efforts is not to propose a specific solution, it is to help define what the country needs and to encourage an open, productive dialogue about how to achieve it. Americans deserve access to health-care coverage that is adequate to meet their needs, affordable, available when they need it and administratively simple. The American Cancer Society will continue to fund groundbreaking cancer research, raise awareness about prevention and early detection, and advocate for tobacco control measures and programs that provide screening and treatment to the underserved.

Hold local lawmakers and state legislators accountable for pre-election health-care proposals and promises. The American Cancer Society Cancer Action Network will continue to defend funding for breast and cervical cancer screening and treatment programs, as well as funding for tobacco control programs. By building on our progress against cancer while working toward real solutions to the nation’s health-care crisis, we can help ensure that everyone has a fighting chance against cancer.

Sandra Cassese is assistant vice president for oncology and ambulatory services at Vassar Brothers Medical Center in Poughkeepsie and the state lead ambassador for the American Cancer Society Cancer Action Network.

M.T.A. Warns of Service Cuts and Fare Increases

By William Neuman

Deep cuts in subway, bus and commuter rail service could come as early as spring, followed by a double-digit rise in fares and tolls in June, transportation officials said on Thursday as they revealed a gloom-and-doom budget that came with a “cry for help” to elected officials to bail the authority out of its financial crisis.

But elected officials said they had no money to give and would wait to hear the proposals of a state commission that was seeking new revenue, which may include tolls on East River bridges and higher taxes, for the Metropolitan Transportation Authority.

THOMPSON PLAN: REGIONAL WEIGHT-BASED FEES ON PRIVATE, COMMERCIAL VEHICLES TO GENERATE TRANSIT REVENUE

-Thompson also endorses resurrection of commuter tax for a combined potential revenue of more than $1.8 billion annually-

In a move designed to meet New York City’s pressing transit fiscal needs, New York City Comptroller William C. Thompson, Jr. today unveiled a plan to impose a weight-based registration fee on private and commercial vehicles.

Tackling NYS’ growing budget deficit a grim task

By James T. Madore

Gov. David A. Paterson is warning that next year’s budget will be “grim,” with retrenchment virtually everywhere, from schools and hospitals to building projects and social welfare agencies.

The cuts will probably be deeper because of last week’s failure by Paterson and lawmakers to close a $2-billion hole in the 2008-09 spending plan. That red ink now must be rolled into the projected $12.5-billion deficit for 2009-10, precipitating reductions in spending rather than slowing its growth.

Recovery means a hand from D.C.

By Malcolm A. Smith

Gov. David Paterson’s proposals for significant cuts to the state budget are a prudent acknowledgment that our nation’s economic problems and the continuing crisis on Wall Street will force big changes in the way we do business in Albany.

We’re going to have to slash state spending. We’re going to have to find unprecedented new efficiencies in government administration.

And we won’t be able to avoid cuts to some programs that provide valuable services. There’s simply not enough money available to pay for everything state government has funded in recent years.

But most of all, we’ll need bigger and stronger state-federal partnerships than ever.

Purchase of Turkish carpet takes taxpayers for a ride?

By Rick Karlin

Amid crisis, state pays $21,000 for mansion rug

Gov. David Paterson’s energetic response to the state budget crisis has been the hallmark of his tenure, but even as he was ordering state agencies to cut their spending and warning of even tougher times ahead, his Office of General Services was buying a $21,000 custom-stitched 10-foot-by-15-foot antique carpet for the governor’s mansion.

Paterson makes small dent in lowering deficit

By James T. Madore and Juliann Vachon

Unable to reach agreement with lawmakers on the budget deficit, Gov. David A. Paterson said yesterday he would act unilaterally while preparing next year’s fiscal plan.

“There are some ways that I can still undertake, and will, to try to save the state further money,” he said in Washington.

“But we’re talking about a few hundred million dollars, perhaps topping out at a billion dollars. The problem is that there are 14 billion dollars to go,” he added.

Political gridlock persists

By Irene Jay Liu

Gov. David Paterson may have sounded the alarm on the state’s fiscal crisis, but it was drowned out Tuesday by partisan bickering and political rhetoric from state leaders, who did nothing to address the state’s looming $1.5 billion budget deficit in what was supposed to be a special session.

The governor and legislative leaders failed to reach an agreement on the $2 billion spending cuts that Paterson requested for this year in anticipation of the scheduled session, and said he does not expect the Capitol to address the issue until January, when Democrats will take control of Senate for the first time in 40 years.

Instead of the planned legislative session, the governor and leaders of the Senate and Assembly participated in a public meeting in front of the assembled media — an hourlong piece of political theater during which all participants voiced grievances, pointed fingers and argued over the reasons why they were not able to act, all the while acknowledging the severity of the problem that brought them there in the first place.

No budget fix as Gov. Paterson, pols only bicker

By Kenneth Lovett and Glenn Blain

A special fix-the-budget session fizzled Tuesday as Gov. Paterson and legislative leaders fought and bickered, but did nothing to remedy the fiscal crisis.

“If it looks like a dysfunctional government and it acts like a dysfunctional government, it may actually be one,” a frustrated Paterson said shortly before the brief session.