WASHINGTON — New York, the land of high-flying risk-takers and high-paying jobs, is suddenly taking a back seat to Washington, the land of many bureaucrats.
For the foreseeable future, the nation’s capital could also serve as its virtual financial capital, experts say, as it tries to stabilize an economy suffering from Wall Street excesses.
Not only are the Federal Reserve and the Treasury Department writing the checks to keep the nation’s troubled banks afloat, they are preparing for tougher regulation that could crimp Wall Street’s free-wheeling style.
The shift in power comes as some wonder whether the United States has lost its crown as the world’s financial capital.
“The general European view is that the credit crisis will lead to the permanent neutering of the once-dominant financial- services industry,” said David Smick, a global financial expert and author of a book on the global economy.
“America’s ability to finance risk will be restricted,” said Smick, who sounded out European opinion about America’s standing during recent World Bank and International Monetary Fund meetings.
In the near term, at least, Wall Street will be tamped down by Washington’s stiff and somber — and risk-averse — culture. The repercussions are expected to be felt throughout the country but especially on the East Coast.
“New York is going to be a basket case for a decade,” said Michael Drury, a former Lehman Brothers employee in New York and now senior economist at McVean Trading and Investment LLC, a futures- trading firm.
Drury predicted fewer people in their 20s will be able to take their first jobs on Wall Street and rake in more than $100,000 a year. Now, some might be headed for Washington, where salaries are not as high.
Washington’s Robert Litan, a Brookings Institution expert on financial markets, said the U.S. government will hire more people to do regulatory work.
How many employees the federal government will throw at the problem is unclear. The Treasury Department has more than 100,000 employees, but 90 percent work for the Internal Revenue Service. A spokesman said many of the new workers will be hired on a contract basis. The Federal Reserve Board has 2,000 employees and an additional 19,000 at the Federal Reserve Banks across the country.
Stan Collender, head of a communications firm in Washington, said he expects major legislation next year that would call for closer oversight of financial-services companies.
“Expect lots of hearings, lots of oversight, lots of continually outraged members of Congress,” he said. “The legislation will make some permanent changes in the way the financial-services world works.
“Washington isn’t going away any time soon. You don’t invite/beg/demand $700 billion from the federal government and then expect it to just go away after the check clears the bank,” he said.
