NY securities firms may beat mayor's loss forecast

NEW YORK (Reuters) - New York City's securities companies could perform better this year than the mayor's prediction of a combined loss of $14.3 billion, the state comptroller said on Wednesday, citing recent strong results from a few major players.

The high-paying industry, which drives the local economy, earned $8.2 billion in the 2009 first quarter, Comptroller Thomas DiNapoli said in a report.

Earnings got a lift from federal bailout funds, falling interest rates and expenses, and rising trading profits, partly because harsh mark-to-market rules were eased, he said.

"This was a stark change from 2008, when Wall Street experienced huge write-offs, and posted a record loss of $42.6 billion," the Democrat said in a report.

Last year, three major firms were lost due to failures or mergers, and year-end bonuses fell 44 percent to $18.4 billion, DiNapoli said.

GONE BUT NOT FORGOTTEN

While Lehman Brothers was forced to file for bankruptcy after a federal rescue didn't come through, the government pushed Bank of America Corp into acquiring Merrill Lynch, and JPMorgan Chase swept up Bear Stearns for just $2 a share.

When Wall Street is thriving, it fuels hiring in other sectors from florists to law firms.

But the so-called "employment multiplier" was thrown into reverse during the recession, causing the city to lose jobs in all but two industries, education and healthcare, the report found.

Though Wall Street has been blamed for pushing the country into the recession that began in December 2007, the city economy grew until September 2008, Federal Reserve data shows.

Mayor Michael Bloomberg, an independent hoping to win a third term based on his management acumen and improvements in the public schools, predicted that securities firms will cut 47,000 jobs from the start of the downturn to the end of the third quarter of 2010.

Bloomberg expects the city to lose a total 328,000 jobs in the downturn, the report said. That would top the cuts seen in the early 2000s.

But the recent slowdown in the pace of layoffs suggests the mayor's forecast may be too gloomy, DiNapoli said.

REAL ESTATE CLOUD'S SILVER LINING

Sales of cooperative apartments are expected to decline through the third quarter of this year, but condominium buyers may see a longer stretch of discounts, the report found.

Prices for condos, which speculators favored, may fall 44 percent from the 2008 first quarter to the fourth quarter of 2010, the report said, citing the mayor's estimates.

The stricken real estate market has forced many developers to halt or delay projects. The rebuilding of the World Trade Center is a striking example as the lack of financing slows work.

But there is an upside to the real estate slowdown.

"Overall, the city expects that the lack of overbuilding in recent years will limit available inventory and thus limit the depth of the commercial real estate downturn," DiNapoli said.

Still, the steep decline in Manhattan office rents, which already exceeds the mayor's forecasts for this year by around $5 per square foot, reflects the "retrenchment" on Wall Street as well as at media companies and law firms, the report said.

Primary office space in Manhattan rented for $65.57 per square foot in June 2009, down from $87.10 one year earlier, DiNapoli said, citing Colliers ABR data.

Echoing another fiscal monitor, the state Financial Control Board, DiNapoli forecast that the city's budget gap will be about $1 billion more than the mayor's estimated in fiscal 2011.

Albany is another factor, since New York's governors can greatly affect the city's budgets. Governor David Paterson, a Democrat, said on Wednesday he vetoed a bill that would have cost New York City $162 million by modifying how the tax code treats out-of-pocket medical expenses for seniors.

(Reporting by Joan Gralla; Editing by Jan Paschal )