NEW YORK (Reuters) - The drop in Wall Street’s bonuses “could rival” the 50 percent fall seen in 2003, with the current market crisis cutting the total amount paid by banks and brokerages to $16 billion, the state comptroller said on Monday.
New York’s securities industry could lose even more jobs than first estimated as the 13-month old global credit crunch grinds on. Some 40,000 bankers and brokers could be laid off, which would be 15,000 more than initially forecast, Democratic Comptroller Thomas DiNapoli said in a statement.
New York state receives about one-fifth of its tax dollars from Wall Street, whose workers rely heavily on their bonuses for a large part of their annual pay. Economists debate how many service jobs, in industries from retail to software, are lost when Wall Street cuts workers, and DiNapoli said three service jobs could be lost for each one cut by a bank or brokerage.
Predicting that the snowballing financial crisis could cost the state $3.5 billion in tax revenues by March 2010, DiNapoli added: “The state has to watch its spending. Every dime counts in a crisis.” New York starts its new budgets on April 1, and next year’s deficit already totals $5.4 billion.”
Although Democratic Gov. David Paterson sought to bring the legislature back to cut the budget further before the November elections, he softened his stand last week in the face of resistance and now plans to meet with leaders later this week.
Republican Senate Majority Leader Dean Skelos, in a statement, said: “It is imperative that we work together in a bipartisan manner to address these concerns in the best interests of the taxpayers of New York.” A spokesman for the Democratic Assembly Speaker had no immediate comment.
New York state’s personal income taxes were $2.7 billion ahead of last year’s collections in the first six months of the fiscal year, which more than made up for a $506 million drop in business taxes, the comptroller said.
But personal income tax collections slowed in the latest three-month period, rising only $260 million, which shows the downturn is starting to bite, DiNapoli added.
Although New York City got a bit of a reprieve when Barclays PLC (BARC.L) agreed to keep many of now-bankrupt Lehman Brothers LEHMQ.PK employees until the end of the year, there was no let-up in pressure on U.S. banks, with Citigroup (C.N) agreeing to buy Wachovia Corp WB.N.
Citi will get Wachovia’s retail and investment banking operations. The North Carolina-based bank has 45 branches in New York City, according to ReferenceUSA, part of Omaha, Nebraska-based InfoGroup Inc.
Reporting by Joan Gralla; editing by Dan Grebler