But a new report by New York state’s fiscal watchdog shows that investors may be too optimistic. Wall Street workers face huge threats, and their employers’ friends in the White House may not be able to rescue them.
The news from state Comptroller Tom DiNapoli at first seems encouraging: Wall Street profits were up “sharply” last year — by 21 percent — and jobs and bonuses are up, too.
The $17.3 billion profit line was a turnaround from the previous three years, when profits had fallen. “The jump in profitability is good news, since the industry generates a significant amount of tax revenue” for New York, DiNapoli said.
But there is less here than meets the eye. A lot less.
Though profits were up, revenues were down. In fact, revenues fell for the second year in a row, by 1.3 percent.
Wall Street banks increased profits only because one huge expense also fell: the billions of dollars they’ve had to pay to the government in fraud and other settlements since the 2008 crisis. Banks are seeing a boost because they’re finally done paying for this mess.
Bank executives should be relieved that this is all over, but they aren’t celebrating by beefing up staff or bonuses. Yes, the industry has added 11,100 workers in the past three years. But it’s still missing 11,900 of the 188,900 people that it employed in New York before the crisis.
Wall Street has added fewer than half of its laid-off workers back, despite more than seven years of general economic growth for the country.
As for bonuses? The average Wall Street worker took home $138,210 this winter as a bonus for the previous year’s toil. That’s nice, but it’s less than the $146,300 he took home in 2004 (after adjusting for inflation).
This is an industry that still pays well, but an industry in decline.
The financial industry, of course, is bigger than just Wall Street. But the full industry is shrinking. By the end of 2006, more than 8.4 million Americans worked in overall finance, whether running Goldman Sachs or serving as a bank clerk. By the end of 2016, fewer than 8.3 million Americans held such jobs.
New York City has been hit harder. The 465,800 New Yorkers working in finance last year means 22,800 fewer jobs than in the year 2000.
Finance is suffering the same fate as other American industries: automation and offshoring. Customers don’t see the point in paying a mutual-fund manager good money so that manager can pick a few good stocks; they know they can do better with a low-cost fund that automatically invests in a large basket of stocks.
Meanwhile, as the Financial Times reported in February, the four largest US banks employ more than 12,500 people in India, a 50 percent hike since 2008.
And as much as President Trump is seeking to help finance, it’s not clear his proposed policies so far will do that — or, at least, they might not create jobs.
A few Wall Street watchers got excited last month when Trump ordered regulators to revisit the proposed “fiduciary rule,” which would have directed retirement-account brokers to put their clients’ interest above everything else, including their employers’ desire to make high fees.
But customers are ahead of the government here. Rule or no rule, high-fee retirement accounts are disappearing, because it’s much easier to compare fees today.
As for Dodd-Frank, the Obama-era financial-regulatory law: It’s a bad law, and Trump may seek to change it.
But when he said last month that for every new regulation enacted, he’d direct his government to kill two old regulations, the fine print said regulators only have to “identify” two rules they’d like to get rid of for every new one they actually issue. I can “identify” a mansion I’d like to buy, but that doesn’t get me any closer to buying it.
Meanwhile, interest rates are going up — making it harder for people to buy a house, another big source of profitability for banks.
In New York, as in the rest of the country, bank branches have been closing. That’s good if you’re tired of banks, but, needless to say, bad for the middle-class people who might have worked there.
Source: NY Post