I came across a startling number Tuesday: New York State depends on Wall Street for about 20 percent of its revenues.
Which means that, as Wall Street's day of reckoning has arrive, so has the Empire State's.
The meltdown will not be short-lived. As a headline in Tuesday's New York Times said, A Sense That Wall St.'s Boom Times Are Over. That means the state will be forced to tighten its belt, not just for the next year or two, but for the foreseeable future.
At a special session in July the state trimmed some of the added spending. But we're still not seeing anything out of Albany that reflects real fiscal discipline, the governor's tough talk notwithstanding. If anything can change that, it's the meltdown on Wall Street.
I don't pretend to understand all the nuances behind the crisis. My takeaway: comeuppance to a lot of folks who resisted regulation and paid themselves way too much.
How too much? The Washington Post reported a while ago:
Wall Street bonuses totaled $33.2 billion in 2007, down just 2 percent, by the estimates of the New York state comptroller's office.
Seven of Wall Street's biggest firms boosted their total compensation and benefits to a combined $122 billion, up 10 percent since 2006, despite seeing their net revenue collectively fall 6 percent, according to Equilar, an executive-compensation research firm based in California. Mortgage-related losses reported by the seven firms totaled $55 billion and wiped out more than $200 billion in shareholder value.
"In a year when shareholders have lost nearly half the value of their holdings, it strains one's imagination how the firms can continue to give such pay," said Michael Garland, director of value strategies at CtW Investment Group, which works with pension funds on corporate governance. "You've got Wall Street guys engineering derivatives securities that destabilized broader financial markets -- it's hard to understand why anyone should get paid for that."
The seven large firms -- Merrill Lynch, Citigroup, Bear Stearns, Morgan Stanley, J.P. Morgan Chase, Lehman Brothers and Goldman Sachs -- richly compensated their employees and executives even as three of those firms suffered their biggest losses ever in the final months of 2007. Employee compensation at those firms was equal to 47 percent of net revenue in 2007.
A whole lot of folks are hitting the bricks. Reports the New York Times:
Approximately 11,000 jobs were lost in New York's finance and insurance sectors between July 2007 and July 2008. More recent data will likely show this number continues to grow and based on past data, approximately 40,000 jobs in the financial services industry in the New York City area can be expected to be lost in the current downturn. All told, approximately 120,000 jobs may ultimately be directly and indirectly affected as a result of financial sector turmoil.
In a press release the other day, the governor's office announced it was rushing to help those losing their jobs obtain unemployment insurance.
The Labor Department will dispatch its rapid response specialists to assist displaced workers in New York City’s financial industry. These rapid response sessions will provide workers with basic information on how to file an unemployment claim, possible training opportunities, labor market information, and workshops covering everything from resume writing to interviewing skills.
Excuse me while I snicker.
The problem with all this is that the rest of us will pay the price for Wall Street's excesses. I'm afraid to look at what it's done to my 401-K balance.