Over at the Financial Times, Michael Skapinker writes that New York and London will rebound for three reasons:
[O]ne day, with new regulations in place, companies will return to raising funds, banks to lending and financiers to making money. New York and London will remain the best places to do this because they retain the advantages they had before. The first is language. Lehman Brothers may have gone overnight, but it takes centuries for a language to disappear. A global generation has invested years learning English, which has no ready challenger. The two cities’ second advantage is law. The US may be excessively litigious and lawyers may charge outrageous fees in both cities, but where else would you look to the law to defend your corporate rights? Shanghai? Moscow? The third advantage is collective brain power. This may seem laughable, given where bankers’ supposed intelligence has landed us now, but the solutions to this crisis will come in cities most open to raucous debate from whoever has anything to contribute. The next 30 years will be different, but New York and London will rise again.
Maybe – but we’re also likely to see some shift in financial power, especially to Asia, over this time. I also think it’s a huge mistake to read NY and London as financial centers. My own sense is that it is their broadly based creative economies that have propelled NYC and London to economic heights. I’d like to see the two cities spread their bets even more broadly across entertainment and creative industries and other forms of innovation.
And Charlotte looks to be hard-hit, according to the Wall Street Journal:
“The sale of Wachovia bank to Citigroup Inc. has thrown this city — obsessively proud of its status as the nation’s second-leading banking center behind New York City. Construction continues on the new Wachovia headquarters in Charlotte, N.C., even as the bank is absorbed. Overnight, Charlotte faces the prospect of losing not just thousands of jobs but its civic identity.”
Worse yet, cities and states are already feeling the effects of tight credit, according to the New York Times:
“Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening. The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike.”
This will surely get worse in the weeks and months ahead so expect more cutbacks. And it will hit everything from badly needed infrastructure projects to schools and even great state universities. This kind of retrenchment will surely affect the ability of U.S. cities and regions to compete globally for investment, business, and talent in the long run.