Is Wall Street Losing Its Luster?
Markets abroad are making inroads
One by one, American industries are finding more fertile ground overseas. In industries from textiles, steel, and automobiles to high-tech electronics and software design, America no longer reigns supreme. And now some worry that America's crown jewel, Wall Street, is on its way out, too.
The hand-wringing is about the rapid growth of overseas financial markets. Everyone from President Bush to New York City Mayor Michael Bloomberg has weighed in, complaining that overseas competition, combined with overregulation at home, will leave America behind the curve.
"The financial markets are a cornerstone of New York State's economy," said new Gov. Eliot Spitzer following the release of one study casting doubt about their future. But "we are in danger of losing our pre-eminence as the financial center of the world."
Those are high stakes. But there is a good deal of debate over whether Wall Street really has anything to worry about. "I think the relevant data [have] been very overplayed so far," says Joel Seligman, president of the University of Rochester and a member of the board of governors of NASD, a private-sector securities regulator.
Those calling for change can indeed point to recent studies noting alarming trends. The Committee on Capital Markets Regulation says that America is losing stock listings, financing, and trading to other markets, in part because of "the growth of U.S. regulatory compliance costs and liability risks." Another study, commissioned by Bloomberg and New York Sen. Chuck Schumer, warns that a "thicket of complicated rules" could mean the New York-based financial services industry will lose out on up to 60,000 new jobs if something isn't done.
Looking at the top 20 global initial public offerings of stock, the market data firm Dealogic notes that only two of these IPOs—for MasterCard and KKR Private Equity Investors—went public in the United States last year, compared with nine in 2000 and 12 in 2001.
Treasury Secretary Henry Paulson will delve into what's affecting the competitiveness of U.S. capital markets at a conference in Washington, D.C., later this month. The U.S. Chamber of Commerce, which has railed against many of the post-Enron regulations—such as the Sarbanes-Oxley law, said to be at the crux of the problem—is also planning to release its own report at around the same time.
But folks are not unanimous on whether IPO numbers—or anything else presented so far—mean that America has become uncompetitive. While some companies are chafing at the high stock underwriting fees charged in the United States and a few have complained of regulatory hurdles, Thomson Financial recently noted that there were more foreign IPOs in the United States last year than at any time in the past 20 years, which hardly signals a regulation-induced flight.
And it's possible that some of the firms listing overseas would not be that welcome here. "There are an awful lot of dodgy companies that are being floated overseas that would never be allowed over here," says Jim Chanos, chairman of the Coalition of Private Investment Companies. "And that is a good thing."
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