Wall St. disaster plan
Mon Oct 21, 7:19 AM ET
By DOUGLAS FEIDEN
DAILY NEWS STAFF WRITER
Fears of another major attack on New York City could force the exodus of thousands of Wall Street jobs and billions of tax dollars if a doomsday plan quietly drafted by federal regulators takes effect, the city's business leaders say.
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The disaster contingency plan ? prepared by the top three regulators of the U.S. financial system ? could push as many as two dozen major banks and securities companies to their backup operations as much as 200 to 300 miles out of town.
The Federal Reserve (news - web sites) Board, Securities and Exchange Commission (news - web sites) and Office of the Controller of the Currency are seeking to safeguard the critical financial markets from future terror attacks or other disruptions.
The plan was created in reaction to 9/11, but it could take effect even if no second massive terror strike occurs.
The regulators' approach ? spelled out in a report ? suggests the development of "out-of-region backup sites" that would be separated, at great distances, from New York locations.
That would effectively take jobs, businesses and taxes from Wall Street.
"It could lead to the loss of up to 20% to 25% of the jobs in the financial services industry in the region if broadly implemented," said Kathryn Wylde, president of the New York City Partnership and Chamber of Commerce (news - web sites), the city's most influential business advocate.
Based on partnership discussions with Wall Street executives and industry sources, she said the plan, if not narrowed, would cause immense job losses downtown and in Brooklyn, Long Island City, Jersey City, Westchester County and other nearby locales where financial organizations maintain backup facilities.
"It would be another crushing blow to lower Manhattan and the New York economy," Wylde said.
Losses keep mounting
When payrolls peaked in August 2000, there were 190,000 jobs on Wall Street. Battered by the Sept. 11 attacks and a national recession, the tally plunged to 165,000 by the end of 2001, and after more layoffs and the shattering of faith in publicly traded companies, it dived again this year, to 155,000.
If securities industry fears are realized, a 20% cut in the workforce would cost the city an additional 31,000 jobs ? and a 25% reduction would drain 38,750 positions.
"New York City spent more than 200 years building its reputation as the financial capital of the universe," said Assembly Speaker Sheldon Silver (D-Manhattan), who represents much of the Financial District.
"Now we are effectively being told to move 25% of our employees out of downtown, out of the city and out of the state ? and it will just devastate the industry and the vitality of the entire region."
The job loss would corrode the city's already-vulnerable tax base. The average taxable Wall Street salary is $109,500 a year, and City Hall anticipates tax revenues from the industry to come in at $2.3 billion or less this year, down from $2.9 billion in 2000.
If those tax receipts shrank by an additional 20% to 25%, that would mean an extra shortfall of $580 million to $725 million in the city's budget ? at a time it already faces deficits of about $6 billion annually in each of the next three fiscal years.
The financial powerhouses that could have to shift jobs from New York because of the regulators' plan include Bank of New York, Bear Stearns, Citigroup, Goldman Sachs, J.P. Morgan Chase, Lehman Brothers, Merrill Lynch and Morgan Stanley.
"There's nothing here that requires firms to abandon New York or move out of the city," said Lawrence Sweet, vice president of the Federal Reserve Bank of New York.
Quicker response urged
Christi Harlan, the SEC's chief spokeswoman, declined to comment because the agency is still gathering input on the plan.
The report was released Aug. 29 with little fanfare by the Fed and the SEC. The seven-week comment period ends today, after which it may or may not be modified, then adopted as guidelines or regulations.
The report says: "Firms that play significant roles in critical financial markets should, at a minimum, plan to recover on the same business day" of a catastrophe.
It suggests business should resume no more than two to four hours after an interruption ? as opposed to the four days most markets took to reopen after 9/11. To ensure quick recovery, it urges financial behemoths to develop "fully operational, out-of-region backup facilities for data and operations" or similar "remote outsourced facilities."
The plan urges maximum geographic separation from the primary office ? as much as 300 miles.
The rationale: If an act of mega-terrorism takes place halfway between a Wall Street headquarters and a backup site ? say at MetroTech in Brooklyn or Long Island City, Queens ? it could destroy both. But if such a cataclysm was centered midway between downtown and a secondary site, say in Rutland, Vt., 209 miles from the Statue of Liberty, both probably would survive.
"It pushes people out of the city by saying midtown, Staten Island and Brooklyn are all out of the equation," said Andrew Mayer, managing director of Arc Partners, which consults blue-chip clients such as Nasdaq, Citigroup and Merrill Lynch on technology. The report asks 15 to 20 major banks, five to 10 major securities companies and the leading clearinghouses and depositories ? none of which is identified by name ? to consider:
Minimum distances between front office and back office sites, which could require a 200- to 300-mile separation.
Separate labor pools to service the prime and alternative facilities.
Independent infrastructure to serve and connect the two sites. |
