Saving New York City

Yesterday evening, the New York City Economic Development Corporation (NYC EDC) hosted an event for folks from the financial service industry to discuss the impact of the crisis on the city and what can be done about it.  The opening presentation outlined the extent of the problem.  In New York City 15% of all employment is in or directly related to financial services, generating 34% of all wages.  That is not even counting any jobs that depend on the wages earned by someone employed in financial services.  The city budget for 2009 is based on the assumption of a jobloss of 31,000 jobs in financial services and 147,000 private sector jobs overall.  That is significantly up from the May estimate and I believe still too low.  New York City is clearly facing a huge crisis.

Last night’s get together was meant to generate some ideas what the city could do help mitigate the impact.  There was a lot of talk about the potential benefit from stimulating startups and Venture Capital activity.  But much as I am an obvious fan of startups and having more of them will be great for us as venture investors (and will attract even more VC firms to invest in NY), this is not a short term solution by any means.  The number of people that could be absorbed by existing startups and or newly formed ones is tiny compared to the projected number of job lossed in financial sector alone.

In fact, almost all the ideas generated last night were great things in terms of their long term impact but would do little to cushion the short-term blow.  The best idea and one that is a must, is the creation of an exchange for OTC derivatives and the CDS market.  We have all the relevant talent here in the city and such an exchange could literally create several thousand jobs directly and indirectly.  It would be a shame if this exchange wound being in Chicago or London instead.