WEBVTT - NY State Comptroller Thomas DiNapoli Talks Profits, Hidden Risks

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<v Speaker 1>Bloomberg Audio Studios.

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<v Speaker 2>Podcasts.

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<v Speaker 1>Radio.

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<v Speaker 2>News. Now, changing gears here, we welcome now our Bloomberg

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<v Speaker 2>TV audience and radio listeners. New York State Comptroller Thomas

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<v Speaker 2>DiNapoli is with us on his latest report on New

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<v Speaker 2>York City's security industry and Wall Street's bumper year. Tom,

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<v Speaker 2>thank you so much for joining in. What a bumper

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<v Speaker 2>year it is. If the pace continues, $ 90 billion, a

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<v Speaker 2>record haul, obviously great for New York City and New

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<v Speaker 2>York State. Yes. As that record haul comes in, I

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<v Speaker 2>wonder how you're viewing it. Is this sustainable fundamentals for

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<v Speaker 2>the banking sector and thus something to celebrate? Or are

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<v Speaker 2>you concerned that it's something being driven by just temporary volatility,

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<v Speaker 2>especially around AI?

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<v Speaker 1>Certainly money is being made from volatility. And you're absolutely right.

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<v Speaker 1>AI is fueling a great deal of the activity, the

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<v Speaker 1>debt issuance. We also see a lot of activity, merchant acquisitions, IPOs.

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<v Speaker 1>and just general trading. How long this will last, we

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<v Speaker 1>don't know, but for now, certainly to have first-of-the-year profits

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<v Speaker 1>over 50% ahead of last year. And as you point out,

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<v Speaker 1>we project if the trend holds, by the end of

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<v Speaker 1>the year, it could be a real record year, $ 90

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<v Speaker 1>billion in profits from the securities industry in New York City.

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<v Speaker 1>We track this because of the impact on tax revenue

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<v Speaker 1>for New York City and for New York State. And

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<v Speaker 1>when Wall Street does well, our state budget, our city

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<v Speaker 1>budget benefits helps fund all the other programs that New

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<v Speaker 1>Yorkers care about. There's a lot going on, a lot

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<v Speaker 1>of uncertainty out there, but at least for now, the volatility,

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<v Speaker 1>the geopolitical dynamic is not hurting Wall Street's ability to

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<v Speaker 1>turn a profit.

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<v Speaker 2>Just with that, so if we get into the numbers, Tom,

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<v Speaker 2>so state tax receipts from the industry, $ 26. 3 billion. That

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<v Speaker 2>actually trails the record, even though the record is setting

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<v Speaker 2>a new record. Why are state tax collections lagging behind

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<v Speaker 2>the historic profit that Wall Street is seeing?

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<v Speaker 1>Well, those are still very, very strong numbers. I wouldn't

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<v Speaker 1>minimize that. In fact, as a percentage of tax revenue

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<v Speaker 1>to the state, you're talking about this one sector of

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<v Speaker 1>the economy contributing about 21% of our tax revenue. That percentage,

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<v Speaker 1>in terms of the overall tax revenue, has actually gone

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<v Speaker 1>higher in recent years. So, I think it's still a

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<v Speaker 1>good news story as far as the tax revenue.

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<v Speaker 2>Well, I guess, Tom, part of the reason I ask

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<v Speaker 2>that is just about the overall environment and what we've

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<v Speaker 2>seen from this federal government. To get specific about it,

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<v Speaker 2>has the One Big Beautiful Bill changed things in terms

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<v Speaker 2>of just what you would have been collecting in the past?

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<v Speaker 1>We haven't done an analysis of that. It's probably an

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<v Speaker 1>interesting question for us to look at. But, you know,

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<v Speaker 1>for now, what's very good is that it's not only

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<v Speaker 1>the profits that we're talking about right now. This also,

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<v Speaker 1>if this trend continues, you're probably going to see a

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<v Speaker 1>record increase in the bonus pool for next year. Those

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<v Speaker 1>numbers won't come out until next March. which is just

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<v Speaker 1>around the time the state budget is being finalized. So

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<v Speaker 1>when you consider the fact that, for instance, New York

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<v Speaker 1>City had been planning on the bonus numbers to go down,

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<v Speaker 1>there's a tremendous upside on the revenue picture for the

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<v Speaker 1>city and for the state as well. Because, you know,

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<v Speaker 1>the budgets are based on projections, right? So the state

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<v Speaker 1>had projected... an increase in terms of profits and certainly

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<v Speaker 1>the bonus pool as well. But we're seeing bigger numbers

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<v Speaker 1>than we had anticipated. So again, things could change by

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<v Speaker 1>December 31st, but at the pace we're going, there's a

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<v Speaker 1>tremendous upside in terms of tax revenue for the city

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<v Speaker 1>and for the state.

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<v Speaker 2>The numbers are great, and I'm sure Wall Street and

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<v Speaker 2>their workers who are seeing those bonuses are quite elated. Still, though,

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<v Speaker 2>there's this regulatory and tax friction that I think remains

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<v Speaker 2>top of mind for a lot of financial executives, specifically

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<v Speaker 2>around New York City and Mayor Mom Donnie. How would

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<v Speaker 2>you say the relationship between the mayor and this industry

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<v Speaker 2>is taking form? What are bank CEOs telling you behind

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<v Speaker 2>closed doors about working with City Hall?

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<v Speaker 1>Well, you know, look, it's still a relatively new administration.

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<v Speaker 1>So I think it'd be fair to say the jury

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<v Speaker 1>is still out in terms of long term what the

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<v Speaker 1>relationship will be. You know, the good news is New

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<v Speaker 1>York City continues to be the global capital for finance.

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<v Speaker 1>We've actually been adding jobs in the security sector over

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<v Speaker 1>the past couple of years, contrary to what a lot

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<v Speaker 1>of people have been assuming. The security jobs located in

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<v Speaker 1>New York City, it's still more than any other city,

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<v Speaker 1>New York more than any other state. So this is

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<v Speaker 1>still a very, very strong part of our city economy,

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<v Speaker 1>obviously our state economy as well. New York is still

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<v Speaker 1>the place that people want to be. It's where talent

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<v Speaker 1>wants to be. I don't think that's changed with the

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<v Speaker 1>new administration. How that relationship plays out long-term, I'll leave

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<v Speaker 1>that to the mayor and those executives to work out.

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<v Speaker 1>But I think certainly from what I'm seeing in terms

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<v Speaker 1>of the numbers, New York is still a great place

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<v Speaker 1>for the securities industry to be headquartered and to be

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<v Speaker 1>making money.

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<v Speaker 2>About 5,300 security jobs being added to New York this year. Tom,

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<v Speaker 2>do you then just disregard Goldman's move to open a

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<v Speaker 2>new headquarters in Texas for Apollo also to go to

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<v Speaker 2>the same state as well? Do those types of moves

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<v Speaker 2>not concern you?

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<v Speaker 1>I certainly don't disregard it. But look, populations are shifting,

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<v Speaker 1>wealth is shifting. But again, let's not understate it. We

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<v Speaker 1>are adding jobs in New York in this industry. So

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<v Speaker 1>while jobs may be growing in other places, they start

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<v Speaker 1>from a much lower base. So, the fact that we

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<v Speaker 1>are continuing to have our base, and in fact, those

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<v Speaker 1>numbers are increasing, that is a good news story, and

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<v Speaker 1>I think sometimes it gets lost. No disrespect to folks

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<v Speaker 1>that want to be in Texas. Utah had a huge

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<v Speaker 1>percentage increase in jobs, but Utah started from a very

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<v Speaker 1>low base. So, yeah, we don't want anybody to relocate

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<v Speaker 1>anywhere else, but we don't control all of that. The

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<v Speaker 1>good news is New York is still the place to be,

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<v Speaker 1>and we're growing jobs here as well.

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<v Speaker 2>Tom, again, there's this concern just about fragility of the growth,

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<v Speaker 2>if a lot of it is centering around AI. And

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<v Speaker 2>at the same time, the governor is proposing a plan

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<v Speaker 2>to spend $ 1 billion on rebate checks of up to

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<v Speaker 2>$ 200 or more to about $ 8 million. New Yorkers around utilities,

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<v Speaker 2>and I wonder what you make of that plan. Is

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<v Speaker 2>this now a time where those types of rebates can

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<v Speaker 2>be handed to New Yorkers, or does more care need

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<v Speaker 2>to be taken, just given, yes, a growing New York

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<v Speaker 2>City economy, but one that is very concentrated in a

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<v Speaker 2>certain industry around finance and AI specifically?

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<v Speaker 1>Yeah, yeah. No, you're right about the AI concentration of concern.

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<v Speaker 1>And New York's economy statewide has certainly diversified in recent years. Well,

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<v Speaker 1>the good news is our tax revenue has been coming

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<v Speaker 1>in higher than projected. I'm sure part of that is

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<v Speaker 1>because of the strength of this part of the economy. Look,

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<v Speaker 1>a lot of folks are making money on Wall Street.

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<v Speaker 1>A lot of folks in New York, New Yorkers are

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<v Speaker 1>really struggling. And one of the big impacts has been

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<v Speaker 1>the high cost of utilities. And what the governor and

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<v Speaker 1>the legislature made a policy decision on, and there was

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<v Speaker 1>the money to do it, is to try to relieve

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<v Speaker 1>some of that pressure on everyday hardworking New Yorkers by

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<v Speaker 1>having those rebates. That's a policy choice that they made,

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<v Speaker 1>but this is one of our challenges in New York.

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<v Speaker 1>We're like a tale of two cities, right? We have

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<v Speaker 1>folks doing really, really well on Wall Street, outsized income,

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<v Speaker 1>big bonuses will come out next year, and yet most

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<v Speaker 1>New Yorkers are really struggling just to continue to pay

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<v Speaker 1>the household bill month to month. So that rebate strategy

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<v Speaker 1>is an effort to relieve some of that pressure.

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<v Speaker 2>Tom, only a few minutes left here, but can you

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<v Speaker 2>say more about the concern about concentration around AI? Only

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<v Speaker 2>about a minute here. Does that concern you?

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<v Speaker 1>Yeah, look, it's a concern. We can't control it, but look,

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<v Speaker 1>for now, we're benefiting from it. Whether this really is

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<v Speaker 1>a bubble that's about to burst or not, you know,

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<v Speaker 1>nobody knows. You could speculate all you want.

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<v Speaker 2>But is that going to be a problem for New

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<v Speaker 2>York if it is, if it's a bubble that bursts?

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<v Speaker 1>Any bubble. Look, when the dot-com bubble burst, that was

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<v Speaker 1>a problem for New York. You know, when COVID had

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<v Speaker 1>a close down, when the global financial crisis hit, and

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<v Speaker 1>these cycles happened. So that's why, as an investor, our

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<v Speaker 1>pension fund, we're very diversified. We're not just relying on

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<v Speaker 1>what's happening on the stock market.

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<v Speaker 2>Tom, really appreciate your time this morning. That is the

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<v Speaker 2>New York State Comptroller, Thomas DiNapoli.