New York City Mayor Michael R. Bloomberg and US Senator Charles E. Schumer

"Dear Fellow Americans,

Traditionally, London was our chief competitor in the financial services industry. But as technology has virtually eliminated barriers to the flow of capital, it now freely flows to the most efficient markets, in all corners of the globe. Today, in addition to London, we’re increasingly competing with cities like Dubai, Hong Kong, and Tokyo.

The good news is that we’re still in the lead. Our financial markets generate more revenue than any other nation, and we continue to be home to the world’s leading companies, which help form the backbone of our national economy. In fact, for every 100 Americans, five work in financial services – and these jobs are not just in New York and Chicago. In states as diverse as Connecticut, Delaware, South Dakota and North Carolina, the financial services industry employs major portions of the workforce.

All Americans have a vested interest in strengthening America’s financial services industry, and the time has come to rally support for this effort. To stay ahead of our hard-charging and dynamic international competitors, and to ensure our nation’s long-term economic strength, we can no longer take our preeminence in the financial services industry for granted. In fact, the report contains a chilling fact that if we do nothing, within ten years while we will remain a leading regional financial center; we will no longer be the financial capital of the world. We must take a cold, hard look at the industry, identifying our weaknesses, learning from the best practices of other nations, and drawing upon strategies that will allow us to adapt to the changing realities of the market. That is exactly why we commissioned this report.

The report provides detailed analyses of market conditions here and abroad, informed by interviews with more than 50 respected leaders drawn from the financial services industry, consumer groups, and other stakeholders. The findings are quite clear: First, our regulatory framework is a thicket of complicated rules, rather than a streamlined set of commonly understood principles, as is the case in the United Kingdom and elsewhere. The flawed implementation of the 2002 Sarbanes-Oxley Act (SOX), which produced far heavier costs than expected, has only aggravated the situation, as has the continued requirement that foreign companies conform to U.S. accounting standards rather than the widely accepted – many would say superior – international standards. The time has come not only to re-examine implementation of SOX, but also to undertake broader reforms, using a principles based approach to eliminate duplication and inefficiencies in our regulatory system. And we must do both while ensuring that we maintain our strong protections for investors and consumers.

Second, the legal environments in other nations, including Great Britain, far more effectively discourage frivolous litigation. While nobody should attempt to discourage suits with merit, the prevalence of meritless securities lawsuits and settlements in the U.S. has driven up the apparent and actual cost of business – and driven away potential investors. In addition, the highly complex and fragmented nature of our legal system has led to a perception that penalties are arbitrary and unfair, a reputation that may be overblown, but nonetheless diminishes our attractiveness to international companies. To address this, we must consider legal reforms that will reduce spurious and meritless litigation and eliminate the perception of arbitrary justice, without eliminating meritorious actions.

Third, and finally, a highly skilled workforce is essential for the U.S. to remain dominant in financial services. Although New York is superior in terms of availability of talent, we are at risk of falling behind in attracting qualified American and foreign workers. While we undertake education reforms to address the fact that fewer American students are graduating with the deep quantitative skills necessary to drive innovation in financial services, we must also address U.S. immigration restrictions, which are shutting out highly-skilled workers who are ready to work but increasingly find other markets more inviting. The European Union’s free movement of people, for instance, is attracting more and more talented people to their financial centers, particularly London. The United States has always been a beacon for the world’s best and brightest. But to compete with the growing EU and Asian markets—in a way that grows our economy and creates jobs across the nation—we must ensure that we make it easier for talented people to move to the U.S. to pursue education and employment.

We know that addressing these challenges, and ensuring that we do so in a way that continues to offer strong protections to consumers and investors, will not be easy. But other nations have succeeded in this effort, and so too must we. The industry will continue to experience rapid growth in the 21st Century, which holds great promise for our nation – but only if we take seriously our competitors, who are rapidly gaining ground. Failing to do so would be devastating both for New York City and the entire nation.

In the weeks and months ahead, we will work together to implement the state and local reforms necessary to strengthen New York City’s position as the world’s financial capital. At the same time, we will work with Congress, the Administration, regulators industry leaders, and other stakeholders to take the necessary steps to ensure that America retains its dominant position in the financial services industry in the 21st Century. It is our hope that this report will call attention to the challenges we face in meeting this goal, and serve as a call to action for members of both political parties, and for leaders of every branch of government.

Sincerely,

New York City Mayor Michael R. Bloomberg

US Senator Charles E. Schumer "

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