march 9, 2010 The Street, the City and the State Volume V No. New York n Washington

Transcription

1 Research REPORT march 9, 2010 The Street, the City and the State Volume V No. 6 New York n Washington

2 SIFMA RESEARCH DEPARTMENT Kyle Brandon Managing Director, Director of Research Research Charles Bartlett: Sharon Sung: Maria Victoria Barba: Surveys Bernard Reichert: Nancy Cosentino: Disclaimer The Securities Industry and Financial Markets Association (SIFMA) prepared this material for informational purposes only. SIFMA obtained this information from multiple sources believed to be reliable as of the date of publication; SIFMA, however, makes no representations as to the accuracy or completeness of such third party information. SIFMA has no obligation to update, modify or amend this information or to otherwise notify a reader thereof in the event that any such information becomes outdated, inaccurate, or incomplete. Copyright 2010 Securities Industry and Financial Markets Association The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of hundreds of securities firms, banks and asset managers. SIFMA s mission is to support a strong financial industry, investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit

3 The Street, The City and The State 1 THE STREET, THE CITY AND THE STATE The importance of the financial services industry in general, and the securities industry in particular, to New York City (NYC) and New York State (NYS) is long-standing and well recognized. The industry has a profound impact on, and makes a significant contribution to, personal income tax revenues and overall economic growth of the state and local economy. Even in the currently economically challenging environment, the industry is still an important contributor to NYC and NYS. 1 As of 2009 year-end, the Bureau of Labor Statistics stated that the securities industry employed 799,600 people throughout the U.S.; over 182,700 of those jobs were in NYS, 89.2 percent of which were in NYC. 2 The securities industry accounts for more of total wages paid to NYS and NYC than their percentage of total employment share would suggest. In NYS the securities industry generated 11.7 percent of total wages in the first three quarters of 2009, the latest data available, although the industry accounted for only 2.1 percent of total NYS employment in In NYC the securities industry accounted for 24 percent of total wages in full-year 2008, the latest NYC data available, although it accounted for only 4.4 percent of employment. 3 Securities industry employees also pay a large share of total state and city taxes. Wall Streetrelated tax revenues, including personal income and capital gains taxes as well as business taxes, have accounted for an estimated 20 percent of all NYS tax revenues and 12 percent of NYC tax revenues as recently as 2008; the current economic, market, and regulatory environment, however, are projected to impact those shares severely, by an estimated 25 to 50 percent, according to the Office of the New York State Comptroller. 4 The securities industry also accounts for a large share of the local and state economies. From 1997 to 2007, growth in the securities industry outpaced activity in almost all other sectors of the NYS economy. In 2007, the latest sector data currently available, the securities industry accounted for 8.9 percent of New York State s total GDP, up from 8.2 percent in The average for the past ten years has been 7.5 percent, ranging from the post-dot com bust 6.1 percent in 2003 to the 8.9 percent high in The tax effort required of NYS s workers and businesses is the second highest in the nation; NYC may be near its peak rate for sales, property and income tax. Public policy remains a significant player in the future of the securities industry in NYS and NYC. The threat of further taxation, as well as greater industry regulation has brought uncertainty to the securities industry as a whole, bringing greater uncertainty to all of New York. Ongoing compensation reform is another area of uncertainty, especially in regard to the mix of cash versus stock-based compensation and that effect upon NYS revenue amounts and timing. 1 Revised as of March 26, United States Department of Labor, Bureau of Labor Statistics (BLS) ( 3 NYS Department of Labor, Quarterly Census of Employment and Wages (NYS DOL) ( 4 DiNapoli, Thomas P. and Bleiwas, Kenneth B., The Securities Industry in New York City, Report , November 2009, p. 14. ( 5 U.S. Department of Commerce, Bureau of Economic Analysis, Regional Economic Accounts ( The Street, The City and The State, March 2010 Page 1

4 Introduction Introduction The importance of the securities industry to New York City and New York State is long-standing and well-recognized. Despite becoming more dispersed and increasingly globalized, the industry remains heavily concentrated on Wall Street; New York is still the financial capital of the U.S., if not the world. The industry has a profound impact on and contributes a disproportionate amount to personal income, tax revenues and the growth of the overall economy of NYS and, to an even greater extent, NYC. The financial prospects of NYS, NYC and the securities industry are intertwined. With continuing economic uncertainty, forthcoming regulatory reform and ongoing structural changes in financial markets, it is important to keep a finger on the pulse of this codependent relationship. Each year at this time, we examine this interrelationship; these assessments and some recent related research provide important insights into the outlook for Wall Street, the City and the State. 2009: Review Capital markets recovered significantly in 2009 along with the securities industry. 6 Total securities issuance reached $6.9 trillion in full-year 2009, up $1.9 trillion from 2008 issuance. Municipal issuance totaled $409.7 billion in 2009, the second highest historically. The Build America Bond (BAB) program was very successful, with $64.1 billion issued, introducing new investors to the municipal market. Federal agency debt issuance in 2009 totaled $1.12 trillion, compared to $984.4 billion in Mortgage-related issuance continued to be supported by the Federal agencies Fannie Mae, Freddie Mac, and Ginnie Mae; $1.9 trillion was issued for 2009 compared to $1.3 trillion in The non-agency residential mortgage-backed securities market remained virtually dormant, with a handful of commercial mortgage-backed securities issued towards the end of the year. Asset-backed securities issuance totaled $168.3 billion for 2009, compared to $63.3 billion in Corporate bond issuance reached $907.9 billion for the full year, up from $749.1 billion in 2008; while rating downgrades and defaults have begun 6 Please see SIFMA s Research Quarterly: 4Q and Full Year 2009, Vol. V, No. 4 ( for a more detailed review of to slow down, the refinancing pipeline continues to remain a concern. Equity issuance volume rose by 5.7 percent in 2009 to $256 billion on 912 deals. Secondary offerings reached a ten-year high, primarily due to issuance by the financial sector. U.S. mergers and acquisitions (M&A) totaled $707.4 billion on 7,650 deals in 2009, a decline from the 9,335 deals worth $906 billion completed in First round revisions of real GDP figures were reported at 5.6 percent for 4Q 09 and negative 2.4 percent for full-year While the 4Q 09 GDP growth is a positive sign of preliminary stabilization, future policy remain a concern. The financial crisis and subsequent fall out has led to a wide variety of calls for reform, many of which gained wide spread as well as industry support. 8 But the complexity and interaction of so many proposals has resulted in an increasingly complex and uncertain regulatory environment. While it is never easy to forecast an industry outlook, the multifaceted proposals currently outstanding make that even more complex for industry observers, policy makers, and investors, to name a few. The proposals take many forms, including increased capital and liquidity requirements; size and concentration limits; activity restrictions; accounting changes; and increased taxation and fees, among others. Specific business lines are also undergoing significant change, including securitization and over-the-counter derivatives. Aggregate securities industry pre-tax profits rebounded in 2009; full year 2009 data from NYSE-reporting firms demonstrates significant improvement. Through December 2009, aggregate pre-tax profits were $60.9 billion compared to a loss of $42.6 billion during the full year 2008, following losses of $11.3 billion in full year U.S. Department of Commerce, Bureau of Economic Analysis, National Economic Accounts ( 8 A timeline of major U.S. events affecting the securities industry can be found on pages 11 through 13 of this report. The Street, The City and The State, March 2010 Page 2

5 80 NYSE-Reporting Firms' Pre-Tax Profits $, billions course of regulatory developments Sources: SIFMA Databank, NYSE Net revenue (total revenue less interest expense) also showed significant recovery. Full year 2009 net revenue for NYSE-reporting firms was $172.8 billion, compared to $63.5 billion in 2008 and $102.3 billion in The recovery in net revenue is a positive sign for future recovery, but also reflects the unusually low interest rate environment and decreased use of leverage. 200 NYSE-Reporting Firms' Net Revenue $, billions Sources: SIFMA Databank, NYSE U.S. securities industry employment fell by 6.5 percent nationwide in These job losses reflect both the conditions in the financial services sector and the general trend of rising nationwide unemployment, which hit 10 percent at year-end. New York State lost 17,800 securities industry jobs, or 8.9 percent, of securities industry jobs in 2009; the majority, 16,800, of those jobs were in New York City, which also experienced 9.3 percent unemployment in Employment, which tends to lag behind gains and losses of revenue, was not immediately impacted by profit declines in 2007; layoffs accelerated through 2008 as losses and consolidations mounted. While profits and net revenue rebounded in 2009 and employment losses slowed, it is too early to tell what it may lead. Much depends on both the global economic recovery as well as the The Street, The City and The State, March 2010 Page 3

6 Securities Industry Employment NYS and NYC New York State Securities Industry Employment New York State lost nearly nine percent of its securities industry jobs in 2009, on an unadjusted basis, following a drop of 4.8 percent in Most of the job losses in 2009 occurred in the first quarter, when 9,700 securities industry jobs were lost. Based on non-seasonally adjusted data, since reaching a recent cycle high of 213,000 jobs in August 2007, New York State has lost 30,300, or 14.2 percent, of securities industry jobs as of December The New York State Department of Labor, in a June 2009 report, described the potential repercussions of securities industry job losses for the state as a whole as a direct plus ripple effect. According to the Office of the State Comptroller of New York, each new job in the securities industry is estimated to create an additional two jobs in other industries in NYC and 1.2 jobs elsewhere in New York State. The New York State Department of Labor stated, [p]rojected employment and wage declines in the securities industry are, by far, the largest contributor to future economic uncertainty in the New York State and New York City economies, and unemployment within the securities industry impacts employment throughout the state. 9 Monthly New York State Securities Employment recent November 2007 peak and September 2009 low. This is a less severe drop than in either the post-2000 dot com decline (20.4 percent) or post market crash contraction (21 percent). It also appears that NYC securities industry employment may be recovering more quickly than in those two previous periods. It is estimated that the current securities industry employment contraction lasted 21 months compared to a 31-month period post and 48-month period after the 1987 crash Monthly New York City Securities Employment Employees,thousands Source: BLS The gains in NYC securities industry employment in the fourth quarter of 2009 were revised to show net flat change New York City vs. New York State Employees, thousands Employees, thousands NYC Securities Industry Employment NYS Excluding NYC Securities Industry Employment Source: BLS Source: BLS New York City Securities Industry Employment New York City lost 16,800, or 9.3 percent, of securities industry jobs in full-year The NYS Comptroller s office estimated that, on a seasonally adjusted basis, NYC lost 28,300 securities industry jobs (15 percent) between the 9 Smith, M. Patricia, and David A. Paterson, Turmoil on Wall Street: The Impact of the Financial Sector Meltdown On New York s Labor Market, New York State Department of Labor, June 2009, p Op. cit. 4, p.10 The Street, The City and The State, March 2010 Page 4

7 The Employment Landscape of NYS and NYC New York s Share of Securities Industry Jobs New York State s and City s share of the U.S. securities industry employment fell in New York State accounted for 22.9 percent of total U.S. securities industry employment; less than a percent below the 10-year 23.9 percent mean. New York City accounted for 20.4 percent of nationwide securities industry employment in 2009, a percent below the 10-year 21.6 percent mean. The landscape of the securities industry has changed over the past 20 years. New York is still the dominant location for finance, but while nationwide securities industry employment grew by 346,500 jobs between 1990 and 2009, only 6.2 percent of that growth was in New York State. Movies/Sound Recording IT Systems Design and Services Acct'g/Tax/Bookk'g/Payroll Depository Credit Intermediation Legal Services Federal Government Insurance Real Estate Securities Firms New York State Employment by Industry for 2009 (1999 figures in parentheses) New York State Average Employment by Industry for 2009 Employees, thousands Source: New York State Department of Labor (NYS DOL) Construction 3.7% (3.7%) Manufacturing 5.6% (8.9%) Securities Industry Employment (1999 vs. 2009) Employees, thousands Trade, Transportation & Utilities 17.5% (18.4%) Information 2.9% (3.6%) Finance Excluding Securities 5.8% (6.2%) Real Estate 1.8% (1.7%) Securities 2.1% (2.4%) Professional Services 12.8% (12.7%) Education 4.9% (3.5%) Health 15% (12.6%) Leisure & Hospitality 8.0% (7.2%) 200 Other 2.5% (2.3%) Source: NYS DOL Government 17.5% (16.9%) 0 US NYS Source: BLS New York State: Securities Industry Employment Relative to Other Sectors Securities industry employment as a percentage of overall employment in New York State has decreased slightly over the past ten years, accounting for 2.1 percent of total state-wide employment in 2009 compared to 2.4 percent in However, the securities industry remains a relatively large employer. In NYS the securities industry provides: - Over three times more jobs than the movie/sound recording industry; - More than double the jobs provided by IT systems design and services industry; - 55 percent more jobs than in the accounting/tax/ bookkeeping/payroll professions; - 44 percent more jobs than in depository credit intermediation; - 33 percent more jobs than the legal services profession or the federal government; - 21 percent more jobs than in the insurance industry; and - 14 percent more jobs than in real estate. The Street, The City and The State, March 2010 Page 5

8 New York City: Securities Industry Still A Significant Employer Securities industry positions within New York State are concentrated in New York City, and therefore it is no surprise that the industry accounts for nearly twice as many jobs, relatively, in the City than in the State. Although down from 5.1 percent in 1999, the securities industry accounted for 4.4 percent of total employment within New York City in 2009, far more than several sectors more popularly identified as being large employers by both the government and media. The securities industry provides: - Roughly four times more jobs than in the movie/sound recording industry; - More than three times more jobs than the NYS government; depository credit intermediation; publishing; or the federal government; - More than twice as many jobs than in legal services or manufacturing sectors; - A third more jobs than in real estate; and - Over 25 percent more jobs than in construction. New York City Average Employment by Industry for 2009 Employees,thousands Movies/Sound Recording NY State Government Depository Credit Intermediation All Publishing Federal Government Legal Services Manufacturing Real Estate Construction Securities Firms Source: NYS DOL New York City Employment by Industry for 2009 (1999 figures in parentheses) Construction 3.2% (3.2%) Manufacturing 2.2% (4.9%) Trade, Transportation& Utilities 15.1% (15.8%) Information 4.3% (4.8%) Finance Excluding Securities 7.2% (8.0%) Real Estate 3.0% (2.8%) Securities 4.4% (5.1%) Professional Services 15.5% (15.5%) Education 4.7% (3.5%) Health 15.7% (13.1%) Leisure & Hospitality 8.4% (7.0%) Other 1.4% (1.5%) Source: NYS DOL Government 15.0% (15.0%) The Street, The City and The State, March 2010 Page 6

9 The Impact of the Securities Industry on NYS and NYC Securities Industry: A Significant Share of New York Wages Although the securities industry is not the largest employer, relatively speaking, it accounts for a disproportionate share of wages paid in NYS and NYC. The securities industry paid 24 percent of all wages in New York City in 2008, even though it accounted for only 4.7 percent of all jobs. 11 In NYS, the securities industry paid 14.9 percent of total New York State wages in 2008, the latest full-year data available, while accounting for only 2.3 percent of total employment. The first three quarters of 2009 data show a modest drop, with 11.7 percent of all NYS wages accounted for by the securities industry compared an employment share of 2.1 percent for the year. Since a low of 9.8 percent in the 2003 trough of the post-dot com fall out, the securities industry has averaged an estimated 13.1 percent share of NYS wages. 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Securities Industry Share of Total NYS Wages NYS Securities Industry Wages as a % of Total NYS Note: 2009 NYS data is as of September 30; it is not seasonally Source: NYS DOL; NYS Between 2003 and 2007, the average compensation of securities industry employees grew nearly four times faster than wages in the rest of the City s economy although it fell a marginal two percent in Wall Street workers typically occupy the highest tax bracket, which further amplifies their importance to the fiscal health of state and local governments. Taxes on capital gains, which also reflect financial market oscillations, have also been significant contributors over the years though clearly not under the dire market conditions of the 2008, the latest year for which full-year data is available Securities Industry Wages, NYS Capital Gains and NYS AGI Securities Industry Wages (left axis) NYS Capital Gains (left axis) NYS AGI (right axis) Note: full year 2009 data is not yet available All in $, billions Source: NYS DOL, NYS DOB The Broader Economic Impact of Wall Street The number of securities industry jobs directly affects the number of positions in other industries. As stated by the New York Office of the State Comptroller, for each new job in the securities industry two more jobs are created in other industries within New York City, and 1.2 jobs elsewhere within New York State. 13 With this in mind, it is clear that the significant job losses in the securities industry led to far greater job losses in NYS and NYC, and a future recovery will be equally impactful on the upside. Publishing, accounting, marketing, legal, computer and business services companies all supply key inputs to financial firms and fluctuate as a result of the financial sector s performance and well-being. Wall Street paychecks also influence the fortunes of the City s real estate, retail, restaurant and entertainment industries Op. cit. 4, p.1 12 DiNapoli, Thomas P., and Kenneth B. Bleiwas, The Securities Industry in New York City, Report , Office of the State Comptroller, November 2008, p Op. cit. 4, p.11 The Street, The City and The State, March 2010 Page 7

10 The Securities Industry s Importance to NYS and NYC Budgets City and State budget planners are acutely aware of the importance of the securities industry. As securities industries wages grew in recent years, so too have the taxes paid by securities industry employees, which have accounted for a large share of total City and State tax receipts. At its previous peak in FY 2001, the securities industry contributed $2.3 billion to New York City tax revenues, equal to 16 percent of non-property tax revenues. 14 In 2004 New York City faced, at least on paper, a $6.4 billion gap, but the City ended that fiscal year with a surplus of $1.4 billion, realized in large part from a surge in tax revenues principally from Wall Street. 15 This revenue surge carried into FY 2006 and FY 2007, although the financial crisis, recession and uncertain regulatory environment lowered New York State and New York City s estimated tax revenue for FY 2009 and forecast for FY Although signs of weakness in the credit and housing markets emerged in the second half of 2007, New York State was not adversely affected immediately. Despite Wall Street s variable compensation declining by 3.6 percent in 2007 from the prior year, it was enough to create approximately $2.3 billion in personal income tax revenue for New York State and $630 million for New York City, slightly less than the amount collected in Even in 2008, with the fallout of the subprime crisis being felt in many regions and in the financial sector, New York State and New York City fared better than the national economy. Wall Street variable compensation fell to an estimated $18.4 billion in 2008, a 44 percent decline from $32.9 billion in 2007, but still the sixth largest amount on record. 16 While final 2009 data is not yet available, it is clear from individual firms 2009 financial results released to date that while total compensation has risen to reflect a profitable 2009, compensation as a percent of net revenue has fallen and variable cash compensation has 14 DiNapoli, Thomas P., and Kennet B. Bleiwas, The Securities Industry in New York City, Report , Office of the State Comptroller, October 2007, p Edgerton, Jesse, Haughwout, Andrew F., and Rosen, Rae, Federal Reserve Bank of New York, Institutions, Tax Structure and Statelocal Fiscal Stress, National Tax Journal, Vol. LVII, No. 1, March 2004, p DiNapoli, Thomas P., New York State Comptroller, Wall Street Bonuses Fell 44% in 2008, January 28, 2009, ( been and will continue to be reduced Wall Street Bonuses $, billions $, thousands Total Wall Street Bonuses Average Wall Street Bonuses Source: New York Office of the State Comptroller One of the most important spillover effects of the financial crisis in regards to impact on NYS and NYC is the spotlight on compensation. The topic is an extremely sensitive one; in New York personal income tax collected from securities industry personnel is a significant source for revenue for both the city and the state. This fact was clearly reflected in Governor Paterson s February 3 announcement that a projected $750 million deficit for the New York State budget was driven primarily by the continued effects of the current State-level recession, as well as changes in the timing and structure of financial services sector compensation, which have resulted in lower than expected personal income tax revenues. Personal income tax is the largest category of taxes collected by New York State. 17 Wall Streetrelated tax revenues, including personal income and capital gains taxes as well as business taxes, have accounted for an estimated 20 percent of all NYS tax revenues as recently as 2008, although current conditions could reduce that to 15 percent, according to a November report by the NYS Comptroller. 18 That same report estimates that NYC, while less reliant on personal and business taxes due to its collection of property taxes, had relied on Wall Street for 12 percent of its tax revenues, although worst case estimates could see this share cut by 50 percent. 19 Competitive Issues Technological advances, cost advantages and business continuity planning concerns have all 17 Prante, Gerald, Where do State and Local Governments Get their Tax Revenue? Tax Foundation, October 9, 2009, p.4. ( 18 Op. cit. 4, p Ibid, p. 1. The Street, The City and The State, March 2010 Page

11 contributed to greater geographic dispersion of many key functions which previously had been conducted in NYC. Some of this deterioration is beyond the control of Albany or City Hall but not all. New York s state and local tax burden is currently the second highest in the nation; at 11.7 percent it is 2 percentage points greater than the national average. Historically, New York s state and local tax burden has hovered between first and second place every year since 1977, demonstrating the relatively heavy burden placed on its constituents. 20 This tax burden is believed to contribute to the bulk of the industry s new job creation occurring outside NYC over the past two decades. Further rate increases are likely to result in lower commercial occupancy rates, lost revenues and lost jobs. Based on a survey done by the Chief Executive Group rating states by taxation and regulation, workforce quality, and living environment, NYS came in second to last. The survey report pointed out that state governments [of those lowest ranking states] ought to take a hard look at their taxation and unionization policies if they want to turn the page and attract new businesses and capital to their provinces. 21 Summing Up New York remains the central location for the securities industry and its historic role has allowed it to remain so in the midst of the financial crisis and recession. New York has an unmatched critical mass of financial and non-financial businesses and services that both benefit from the expertise and opportunities afforded by the securities industry and provide support for firms in the industry. The fragility of these businesses, however, cannot be overstated at this time. The health of the securities industry and New York are closely tied. The securities industry firms, exchanges, and associations work closely in partnership with state and local officials to reinforce the relationship between Wall Street and Main Street. New York must continue to recognize the relative importance of the securities industry to the State and City. Costs, including taxes, are foremost in the consideration of top management throughout the private sector, including the securities industry, when it comes to decisions concerning expansion, relocation and competitive pressures. Continuing changes in communications, information technology and the ongoing need for business continuity planning are driving change, which will in turn lead management to seek economic value in their choice of business location. New York State generates a significant amount of revenue from securities industry employment. The New York State Comptroller states in The Securities Industry in New York City, [e]ven in the wake of the crisis, Wall Street remains the economic engine of both New York State and New York City. Although the industry s prospects are much brighter than one year ago, it continues to face challenges as it adjusts to the post crisis environment, and may still experience setbacks. 22 In the late 1980s and early 1990s, the statement that Wall Street is to New York what oil is to Texas gained little acceptance with State and City policymakers. Today, policymakers easily accept this same statement. The securities industry keenly recognizes and appreciates this, and stands ready to assist New York State and New York City policymakers so that both can help one another in difficult or prosperous times in the future. María Victoria Barba Research Analyst mbarba@sifma.org Kyle Brandon Managing Director, Director of Research kbrandon@sifma.org 20 The Facts on New York s Tax Climate, Tax Foundation, July 1, ( 21 Survey by Chief Executive Magazine, February ( 22 Op. Cit. 3, p.1 The Street, The City and The State, March 2010 Page 9

12 Securities Industry Employment Securities Industry Employment (employees in thousands) Year End US Change From Prior Year (US) NY State Change From Prior Year (NYS) Change From Prior Year (NYC) NYS % of US NY City NYC as % of NYS NYC as % of US (9.60%) 77.4 (15.10%) 42.50% 0.7 (15.00%) 96.30% 40.90% (8.24%) 69.0 (10.85%) 41.29% % 95.80% 39.56% % % 40.51% % 96.54% 39.11% % % 41.04% % 96.29% 39.52% % % 39.97% % 95.77% 38.28% % % 39.63% % 95.71% 37.93% % % 38.33% % 95.49% 36.60% % % 38.90% % 94.94% 36.93% % % 39.33% % 94.86% 37.30% % % 38.37% % 94.31% 36.19% % % 38.07% % 94.00% 35.79% % % 37.88% % 94.20% 35.68% % % 37.44% % 94.48% 35.37% % % 37.66% % 94.72% 35.67% % % 37.85% % 94.38% 35.72% (3.86%) (7.18%) 36.54% (7.73%) 93.82% 34.28% (2.69%) (3.87%) 36.10% (4.26%) 93.45% 33.73% % % 35.60% % 93.68% 33.35% % (2.54%) 34.23% (2.98%) 93.26% 31.92% % % (0.61%) 92.68% 29.99% % % 31.98% % 92.59% 29.61% % % 31.77% % 92.70% 29.45% % (0.34%) 31.19% (1.21%) 91.88% 28.66% % % 29.48% % 91.97% 27.11% % % 28.82% % 92.69% 26.72% % % 27.67% % 92.58% 25.61% % % 26.85% % 92.57% 24.86% % % 25.89% % 92.43% 23.93% (3.19%) (15.04%) 22.72% (16.43%) 90.93% 20.66% (4.88%) (1.30%) 23.58% (1.08%) 91.14% 21.49% (2.00%) (1.71%) 23.65% (1.63%) 91.21% 21.57% % % 23.90% % 90.12% 21.54% % % 24.34% % 89.59% 21.81% % % 24.29% % 89.89% 21.83% % % 24.57% % 89.74% 22.05% (0.22%) (4.80%) 23.44% (4.92%) 89.63% 21.01% (6.52%) (8.88%) 22.85% (9.35%) 89.16% 20.37% Source: SIC Codes US and NY through 1989, BLS 1990 forward The Street, The City and The State, March 2010 Page 10

13 January U.S Summary Timeline January 16 Treasury Announces $1.5 Billion loan to Chrysler Financial U.S. Treasury, Federal Reserve, and FDIC Provide Bank of America with Asset Guarantees on $118 Billion February 2 U.S. Treasury Announces New Guidelines on Executive Compensation February 3 Federal Reserve Extends AMLF, CPFF, MMIFF, PDCF, TSLF to October 30, 2009 February February 10 U.S. Secretary of Treasury Timothy Geithner Announces Financial Stability Plan Capital Assistance Program; Public-Private Investment Investment Fund; TALF expansion to $1 trillion FDIC TLGP extension to October 31, 2009 February 17 American Recovery and Reinvestment Act of 2009 Signed Into Law February 18 U.S. Treasury Releases Homeowner Affordability and Stability Plan, Fannie and Freddie Preferred Stock Purchase Agreements Cap Increased to $200 Billion February 26 FDIC Closes 2 Private/Partnership Transactions with 1.45 Billion in Loans March March 2 U.S. Treasury, Federal Reserve Supports AIG March 9 ICE Trust to Begin Processing and Clearing Credit Default Swaps March 18 Federal Reserve Increases Purchases of Agency MBS to $1.25 Trillion, Agency to $200 Billion, Treasury to $300 billion March 19 U.S. Treasury Announces Auto Supplier Support Program of $5 Billion March 31 U.S. Treasury Extends Guarantee Program for Money Market Funds To Begin May 1, 2009 to September 18, 2009 April April 6 Federal Reserve, BoE, ECB, BoJ, SNB Announce Swap Arrangements for Foreign Currency Liquidity to U.S. Financial Institutions April 7 ISDA Announces Big Bang Protocol Implementation (CDS) April 24 Federal Reserve Releases White Paper on Stress Tests April 28 U.S. Administration Announces 2 nd Lien Program under HAMP May May 7 Federal Reserve Announces Supervisory Capital Assessment Program Results May 14 U.S. Administration Announces Home Price Decline Protection Program Under HAMP May 20 Helping Families Save Their Homes Act of 2009 Signed into Law May 22 Credit Card Accountability Responsibility and Disclosure Act of 2009 Signed Into Law June June 12 FASB Publishes FAS 166/167 (Pertaining to Securitizations and Special Purpose Entities) June 25 Federal Reserve Extends AMLF, CPFF, PDCF, TSLF, and Swap Lines to 2010 February 1; modifies TAF June 29 U.S. Supreme Court Overturns Cuomo v. Clearing House July July 1 FHFA authorizes GSEs to expand Home Affordable Refinance Program to homeowners with 125 LTV California declares state of fiscal emergency The Street, The City and The State, March 2010 Page 11

14 July 7 U.S. Treasury and FDIC Launches Legacy Asset Program With Initial Fund Managers July 8 RBS Capital Markets Becomes NY Fed Primary Dealer July 9 SEC Determines California IOUs to be securities July 10 U.S. Administration Unveils Investor Protection legislation July 13 Bank for International Settlements Announces Enhancements to Basel II Framework July 14 ISDA launches Small Bang protocol (CDS) July 15 U.S. Administration Unveils legislation for Hedge Fund registration House Speaker Nancy Pelosi & Senate Majority Leader Harry Reid Announce 6 appointments to Financial Crisis Inquiry Commission July 16 U.S. Administration Delivers Regulation on Say on Pay and Compensation Committee Independence to Hill July 21 U.S. Administration Delivers Credit Rating Agency Legislation to Hill July 22 U.S. Administration Delivers Systemic Risk Legislation Proposal to Hill July 23 U.S. Administration Delivers National Bank Supervisor and Resolution Authority Legislation Proposal to Hill July 27 SEC Takes Steps to Curb Short Sales Car Allowance Rebate System (CARs, Cash for Clunkers ) Begins Nomura Becomes a Primary Dealer July 28 U.S. Treasury Expands HAMP with Supplemental Directive for Home Price Decline Protection Program July 30 U.S. Congressman Colin Peterson and Barney Frank Announce Derivatives Legislation Principles July 31 U.S. House of Representatives Pass H.R Corporate and Financial Institution Compensation Fairness Act of 2009 August August 6 NASDAQ OMX and BATS Exchange voluntarily eliminate flash orders starting 1 September August 11 U.S. Administration Delivers OTC Derivatives Language Proposal to the Hill August 17 Federal Reserve Extends TALF to March 2010 for ABS and legacy CMBS, to June 2010 for new CMBS August 26 FDIC Publishes Final Failed Bank Acquisition Rules FDIC Extends Transaction Account Guarantee to June 30, 2010 Eurex Credit Clear Clears First Single Name CDS Worldwide Financial Sector Self Assessments Submitted to IMF September September 3 U.S. Treasury Sets Principles for Reforming U.S. and International Regulatory Capital Framework September 8 Market Participants Commit to Expand Central Clearing for OTC Derivatives September 9 FDIC Approves Phase-Out of TLGP October 31 September 15 House of Representatives Pass H.R (FHA Multifamily Loan Limit Adjustment Act of 2009) U.S. Treasury and IRS Publishes T.D (CMBS REMIC loan modifications) September 17 SEC Proposes Flash Order Ban September 18 U.S. Treasury Announces Expiration of Guarantee Program for Money Market Funds September 21 ISA Announces CDS Practice Changes for Emerging Markets September 30 U.S. Treasury Announces Initial Closings of Legacy PPIF October October 5 U.S. Treasury Announces Additional PPIF Closings The Street, The City and The State, March 2010 Page 12

15 October 15 House of Representatives Passes H.R (OTC Derivatives Markets Act of 2009) October 16 SEC and CFTC Issue Joint Report on Harmonization October 19 U.S. Treasury Announces Aid for Housing Finance Agencies Federal Reserve Bank of NY Announces Reverse Repo Testing October 21 SEC Votes to Propose Transparency Measures on Dark Pools October 22 Federal Reserve Issues Compensation Proposal October 30 FDIC Adopt Policy Statement on Prudent CRE Workouts H.R Signed into Law (Extends GSE/FHA Loan Limits) November November 3-5 U.S. Treasury Closes 2 PPIPs Federal Reserve Reduces Agency Debt Purchases to $175B from $200B November 6 H.R (Worker, Homeownership and Business Assistance Act of 2009) Signed into Law November 7 G20 Communiqué & Progress Report November 9 Federal Reserve Announces SCAP Final Assessment, Closes Capital Assistance Program November 10 U.S. Senator Christopher Dodd Releases Comprehensive Financial Reform Bill November 12 FDIC Approves Final Rule on Prepaid Assessments November 30 U.S. Treasury & Administration Begins Mortgage Modification Conversion Drive U.S. Treasury Closes Another PPIP December December 1 U.S. Treasury Announces Public Offering of Capital One Warrant December 4 Federal Reserve Adopts Final Rule on Credit Rating Agencies for TALF December 8 U.S. Treasury Announces Public Offering of JPM Warrants December 9 Bank of America Exits TARP With $45B Payment U.S. Treasury Secretary Extends TARP Authority to 2010 October 3 December 11 H.R (Wall Street Reform and Consumer Protection Act of 2009) Passes U.S. House of Representatives December 14 U.S. Treasury Announces Public Offering of TCF Financial Warrants December 15 Ice Trust, CME Group Announces Buyside CDS Clearing December 16 FDIC Board Finalizes Regulatory Capital Rules for FAS 166/167 SEC Approves Rules for Risk, Compensation and Corporate Governance; Client Assets Held by Investment Advisors H.R (Jobs for Main Street Act of 2010) Passes House of Representatives December 18 U.S. Treasury Closes Another PPIF December 21 ICE Trust Begins Single-Name CDS Clearing December 22 Wells Fargo and Citigroup Repay TARP December 24 U.S. Treasury Amends GSEs Preferred Stock Purchase Agreements, Removes $200 Billion Per GSE Cap December 28 Federal Reserve Proposes Permanent Establishment of Term Deposit Facility To Permit Continued Financing of Government Operations (HR 4314) Signed Into Law (Raises Debt Ceiling) The Street, The City and The State, March 2010 Page 13

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