America Competes Act--Continued

Floor Speech

AMERICA COMPETES ACT--Continued -- (Senate - April 25, 2007)

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Mr. SCHUMER. Mr. President, I rise to join my colleague Senator CRAPO in offering our Sense of the Senate to express that the Congress and the administration take the necessary steps to sustain the United States' position as the global leader in financial services to S. 761.

We can all agree that the U.S. is the financial capital of the world. Today, Wall Street is booming, and our Nation's short-term economic outlook is strong. But to maintain our success far into the future we must immediately address a real and growing concern: our global competitive position in the capital markets is being threatened.

The evidence is quite clear.

London, certainly our greatest competitor, has been working hard to gain on us in financial services in the last few years. And, although London has not overtaken us, it is no longer a distant second.

While New York is still the dominant global exchange center, we have been losing ground as the leader in capital formation. In 2005, only one out of the top 24 IPOs was registered in the U.S. and four were registered in London.

Sadly, the problem is not just IPOs. Our competitive position is being challenged in most businesses that are globally contestable.

Today London leads in some of the fastest growing and innovative areas in the financial services. They account for 70 percent of the global secondary bond market, 40 percent of the derivatives market, 30 percent of foreign exchange activity, and 30 percent of cross border equities trading.

Why is this happening? Not because London is more innovative--New York City is and 49 percent of the top CEOs say so. But, what they also say is--given the risks associated with developing innovative financial instruments and the importance of attracting talent in finance--the U.S.'s legal, regulatory and immigration policies are not attractive and it only makes sense to pursue cutting edge activity overseas. To make matters even worse, it is not only London. As technology has virtually eliminated barriers to the flow of capital, it now freely flows to the most efficient markets, in all corners of the globe. So, in addition to London we're increasingly competing for position against cities like Hong Kong, Tokyo and Bombay.

My concern about this issue has been keeping me awake at night. For over a year now I have been racking my brain, trying to understand the causes and fixes needed to keep us No. 1.

Well ..... that is precisely what Mayor Bloomberg and I set out to do in a more formal way when we commissioned McKinsey Consulting to conduct a study to examine the competitive position of New York City's financial services industry, specifically in comparison to London's. The study identified the drivers that might cause New York City to lose its competitive edge, but more importantly provided recommendations and an action plan to correct the problem.

We gathered detailed analyses of market conditions here and abroad. McKinsey interviewed and consulted more than 50 respected leaders from the financial services industry, consumer and labor groups, and other stakeholders.

Our report which was released in January illustrated the reality of the situation. The U.S., New York in particular, is in grave danger of losing its status as the financial capital of the world without a major change in policy and regulation. If we continue on with the status quo, within the next ten years we will go from being number one, to becoming a marginalized regional market--spelling disaster for New York and the entire country.

Financial services comprise 8 percent of the U.S. economy--the third fastest growing sector of the U.S. economy. The industry also plays an important intermediary role in promoting economic activity and creating jobs (savings, investment, borrowing, capital formation, wealth accumulation, transactions). 1 in every 19 jobs in the U.S. is in financial services.

This clearly is not just a New York issue. Many of you will be surprised to learn, just as I was--that seven states (Connecticut, Massachusetts, Delaware, Rhode Island, North Carolina, South Dakota), including New York, have more than 10 percent of their State's GDP devoted to financial services.

Resolving this issue will require all hands on deck. In New York we already recognize that--the Mayor, the Governor, and I have already joined forces.

I strongly believe that we are in a good position to act now in order to lessen the damage that could be waiting for us 10 years down the road.

Cleary, this is an issue that will take some time to work through--taking on our country's regulatory regime, legal system and immigration policies will be no easy undertaking. In recognizing the complexities, our report focused on near term recommendations that are mostly administrative and the longer term recommendations that are legislative.

I want to commend Secretary Paulson and the Department of Treasury for convening a conference on United States capital markets' competitiveness. I hope this will build more momentum for other financial services regulators and Congress to take action and sends a signal that we are in need of a renewed U.S. focus on competitiveness.

We deed to take action to level the playing field for both domestic and foreign companies doing business in the United States, to address more complex policy, legal, regulatory and other structural issues affecting the U.S. position as the world's leading financial center. We must create a responsive, market-oriented regulatory framework, moving closer towards a fair and predictable legal environment, and provide access to skilled professionals from outside of the U.S.

I want to thank my friend and colleague Senator CRAPO for his commitment and leadership on this issue. I look forward to working with you over the next several months to protect our capital markets--this is not a Democrat or Republican issue, it's an American issue.

The bottom line is that we, in New York and in the U.S., literally cannot afford to lose our place as the global leader in financial services and we must examine which factors impede our competitive standing.

At the same time, we have to be smart, careful, and balanced as we seek to continue to redefine the exquisite balance of innovation and regulation as markets evolve internationally.

We know that addressing these challenges and ensuring that we do so in a way that continues to offer strong protections to consumers and investors will be a huge undertaking. But if all stakeholders--industry, consumer advocates, labor, and government--come together in the name of securing our economic future, we can do it.

Failing to do so would be dereliction of duty.

We must all commit to seeking a shift in national policy in a direction that will ensure that New York and America retain its leadership position in the financial services industry well into the 21st Century.

I thank my colleagues for joining us in support of this amendment.

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