Talent Flight Feared by New York City Firms

The New York Sun reports:

With New York's top investment banks either converting into commercial banks or bankrupt, the city is poised to lose revenue and talent, industry analysts said.

The prediction is that many of the highest-paid traders, analysts, and portfolio managers, frustrated with lower earnings potential at commercial banks — the banks are permitted to use only about one-third the leverage of investment banks and so often post lower returns — will leave to start their own hedge funds and investment vehicles, where possibilities for profit are greater. And unlike the Wall Street banks, Manhattan's borders will not bind these new companies.

"You can start up a hedge fund anywhere you have an Internet connection — you don't even need a phone — as long as you have capital and a good reputation," the chief market strategist at research firm Fusion IQ, Barry Ritholtz, said. "Given the collapse of Wall Street, it is hard to know how many people will decide they don't really need to be here."

There are a lot of places in America you can operate that don't have a city income tax like New York City.It's hard to compete when the other guy has a cheaper place to operate.