Bank merger worsens 'Big Apple' debt crisis

VIEW FROM NEW YORK

Last Monday the graveyard face of New York Mayor, Rudolph Giuliani, wore a broad smile. Wall Street had just been told of the impending merger of two of the city's largest and most venerable banking institutions, Chemical and Chase Manhattan, and Mr Giuliani hailed the news as wonderful. The deal, he said, "enhances New York's position as capital of the world".

Perhaps the mayor was so cheerful because he had been let into the secret by the two banks several days ahead of the rest of us. Whatever, it seemed thoroughly uncalled for. The joining of Chase and Chemical will entail the loss of an estimated 4,000 jobs in New York alone - of 12,000 worldwide - and a corresponding reduction in tax revenue. This is not what this city - nor indeed the Mayor - needs right now.

Twenty years after the Apple very nearly went bankrupt, it is again faced with a crippling financial crisis. Public debt now stands at $23bn and the burden was made heavier when the Standard & Poor's credit agency down- graded that debt from a single A minus rating to a triple B plus. By 1999, it is estimated that 19 cents of every tax dollar will go to servicing the city's borrowings, up from the current 13.5 cents. In such a position as this, losing tax dollars would not seem a smiling matter.

Keeping employment in the city is a perennial battle for its fathers. The increasingly extravagant stream of tax concessions offered to companies to resist the temptation to relocate is bearing dwindling results. Two of the financial district's oldest trading floors - the Coffee, Sugar and Cocoa Exchange and the New York Cotton Exchange - recently announced plans to move, syphoning 5,000 jobs from Manhattan. Last Autumn, Swiss Bank fled for Stamford, Connecticut, taking 1,300 jobs.

It is poignant to remember that Chase has been one of the very largest beneficiaries of the city's policy of tax-break bribes. In 1988, the bank won $235m in state and city tax concessions by deciding to move 5,000 workers to Brooklyn instead of New Jersey as originally planned. Now, most of those jobs are to be wiped out.

S&P dealt a harsh blow to Mr Giuliani. The downgrade is likely to make future city borrowings even more expensive and said little of the efforts the Mayor has made to get the city budget under control since he took office 1993. In the face of considerable political risk, Mr Giuliani has trimmed annual spending by $3bn on a budget of $31.5bn Announcing its decision, however, S&P highlighted the one-off nature of some of those savings and cited "persistent softness in the city's economy, highlighted by weak job growth and a growing dependence on the volatile financial services sector".

Mr Giuliani was hardly helped by last year's troubles on the bond market. Most sorrowful, however, has been the speed at which the banks themselves have been shedding jobs in New York, thanks to advancing technology and also to a long exodus of management jobs to the Midwest and the South. While in 1988, 117,900 people worked for banks in New York, that figure has now slumped to 74,700. Among key industries, only hotels this year can honestly report anything approaching a boom. According to latest statistics, there were roughly 3.3 million people employed in the city in July this year, no change on a year before. But over five years, the city has lost nearly 250,000 jobs.

Divining what repels companies from the city is not hard. True, Mr Giuliani's administration has been able to boast some remarkably improved crime statistics of late. But physically, the Apple is rotting. Never mind investing in some of the new infrastructure that companies expect of a modern metropolis, keeping what is already standing from falling apart is hard enough. New York is still a great place to sell shock absorbers.

And there is a danger, of course, that all Mr Giuliani's budget-cutting will only make the situation worse. When the schools open their doors again this week, 6-to 9-year-olds will find their classes have grown bigger again and that their hours with a teacher will be fewer. Meanwhile, the Mayor himself has put another 15,000 people out on the street by streamlining the city payroll.

As yet, New York is not quite in the kind of trouble that it was 20 years ago when it came within days of bankruptcy. But with neither the state nor federal government in any kind of mood to show it any favouritism this time around, the city faces a highly problematic future. One thing it cannot afford to do at the moment is lose jobs. So what are you applauding, Mr Mayor?

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: SThree are a global FTSE 250 ...

Reach Volunteering: Trustees with Finance, Fundraising and IT skills

Voluntary and unpaid, reasonable expenses reimbursable: Reach Volunteering: St...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent
Markus Persson: If being that rich is so bad, why not just give it all away?

That's a bit rich

The billionaire inventor of computer game Minecraft says he is bored, lonely and isolated by his vast wealth. If it’s that bad, says Simon Kelner, why not just give it all away?
Euro 2016: Chris Coleman on course to end half a century of hurt for Wales

Coleman on course to end half a century of hurt for Wales

Wales last qualified for major tournament in 1958 but after several near misses the current crop can book place at Euro 2016 and end all the indifference
Rugby World Cup 2015: The tournament's forgotten XV

Forgotten XV of the rugby World Cup

Now the squads are out, Chris Hewett picks a side of stars who missed the cut
A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'