London and New York City: Not the Only Place to Go For Money

The competition between New York City and London threatens to get out of hand. New York mayor Mike Bloomberg, a billionaire capitalist, recently trekked to London to see how Red Ken Livingstone, the communist-loving mayor of London, a fan of Fidel Castro, Hugo Chávez, hate-spewing Muslims and other such worthies, runs things. Well, not precisely. But he did come to see how London is managing to woo business from New York at an alarming rate. “London is gaining on us in area after area,” moans Bloomberg.

Bloomberg’s voyage of discovery was prompted by studies showing that Wall Street is losing its preeminence as a capital market to The City, a development that has New York Senators Hillary Clinton and Chuck Schumer upset, and mightily worries Treasury Secretary and former Goldman Sachs chief Hank Paulson.

Investment bankers on Wall Street blame their plight on too much government regulation in general, and on the costs involved in complying with the Sarbanes-Oxley Act in particular -- a law passed in the aftermath of the Enron and other corporate scandals.

It’s not clear that the self-styled Masters of the Universe in America’s investment banks have got it right. We are witnessing the globalization of that part of the US financial services sector that has until now experienced less competition than America’s t-shirt and sneaker manufacturers. It is not only London that is draining business from New York, but Dubai, Hong Kong and other exchanges. As Chuck Prince, chief executive of Citigroup told the Financial Times, “We are going to see a diffusion away from New York as a financial centre….New York will not be unimportant, but … people will be going to other places to raise capital.”

Which is not a bad thing.  Neither New York nor London can any longer count on dominating the global financial sector. Both will have to sharpen their acts as they face increasing competition. New York investment bankers might even have to lower their fees, which are twice those charged in London. And London’s AIM, the market on which smaller companies are publicly launched, might have to get fussier about the quality of companies it is willing to list. Just as with other industries, so too with financial services:  competition should make for more efficient capital markets.

That’s not much solace for many New Yorkers, who fret that not only has London become a capital market of choice for more and more companies, but that London has replaced the Big Apple as the world’s most exciting city. That is an idea New Yorkers have difficulty getting their heads around, to use the city’s jargon. For example, The New York Times reports that “London is the best cocktail city in the world right now.” It’s one thing for a New York investment banker to lose a big deal to a London rival, quite another to know that the victor is celebrating in a bar superior to one in which the loser is drowning his sorrow.

This native New Yorker would urge his compatriots to stop worrying. Frank Sinatra was right, as usual. If you wanna wake up in a city that doesn’t sleep, come to New York. Why? Because if you can make it there you’re gonna make it anywhere.

 

Comments

[Gary]

There are many reasons why more companies are choosing to go public in The City over New York, cost is certainly one of them. As a cheaper alternative it has gained momentum, especially with smaller companies and progressive economies. Now it also has a status as the rising star of international finance. That status, combined with its very long history of stability and its current ambivalence toward politics and religion will probably keep it advancing for some time yet.
Regarding the cultural nature of London v New York, there is no competition, London is a vastly more exciting place to be. ‘If you can get it anywhere you can get it there’ one might say.

[Neil Murphy]

THings are always changing, and for any city to remain pre-emininet or even just successful they haev to read their market and sensure they have USPs suited to it. London is doing well now, but it will only continue of the UK government properly nurtures it and The City itself makes sure it continues to market itself effectively.

I am sure Hong Kong and Dubai will will continue their rise, and maybe Shanghai will join them