Locate new U.S. mortgage bailout agency in NYC: Gov

NEW YORK (Reuters) - New York City should be the headquarters of the new federal mortgage bailout agency because it has the professional expertise to launch the rescue quickly and the banking crisis has cost the city and state more jobs than anywhere else, Gov. David Paterson said Friday.

"New York City's ingrained depth of knowledge about the industry, assets and the markets is unmatched by any other metropolitan area," the Democratic governor said in a statement summarizing the letter he wrote Congress and the leaders of the U.S. Treasury and Federal Reserve.

Wall Street salaries and wages provide about one-third of New York City's wage base and financial companies pay the state about one-fifth of its tax dollars.

The Bush administration and Congress are debating creation of a new agency to take poisoned mortgage-related assets off banks' books to arrest the housing and credit market downturn.

Just last month, New York City's securities industry lost 10,000 jobs from a year ago, and Wall Street usually cuts one in five jobs in a downturn, the state labor department says. For each Wall Street job loss, another two to four workers often lose their positions in services.

Paterson also cited the Federal Reserve Bank of New York, located in lower Manhattan, as another reason to choose the city for the agency's headquarters. The New York Fed monitors banks and brokerages and runs the central bank's credit operations.

Wall Street's critics, however, note that its bankers, brokers, lawyers, accountants and analysts all bear some of the blame for the current financial crisis.

But Democratic New York state Attorney General Andrew Cuomo told Albany AM radio 1300 that Washington regulators were "the real culprit." The former secretary of Housing and Urban Development in the Clinton administration asked: "Where were the federal regulators who were supposed to be regulating what a mortgage was and how a mortgage is done?"

Mayor Michael Bloomberg, an independent, says most of bankrupt Lehman Brothers' 10,000 local workers should keep their jobs under Barclays PLC's purchase of about $1.75 billion of Lehman assets. But Merrill Lynch employees whose jobs mirror positions at its new parent, Bank of America Corp, are bracing for cuts, and insurer American International Group might trim some of its 8,500 local employees even after its $85 billion federal bailout.

(Additional reporting by Elizabeth Flood Morrow in Albany.)

(Reporting by Joan Gralla in New York; Editing by Dan Grebler)