A trio of New York government officials on Monday warned the Big Apple will lose its status as the world's financial capital if the United States does not make changes to market rules and immigration policy.

Citing growing numbers of initial public offerings and other financial business moving overseas to Europe and Asia, U.S. Senator Charles Schumer and New York Mayor Michael Bloomberg released a 134-page report urging reforms to help make the United States more attractive.

The report is the latest salvo from critics who contend litigation and regulation since the collapse of Enron is driving capital markets activity overseas. These officials, joined by New York Governor and former attorney general Eliot Spitzer, say they will use their positions in government to pursue rule changes at the federal and local level.

"Today, we are beginning our fight on a legislative level and on an administrative level to keep New York number one" in global financial markets, Schumer said at a press conference in New York City Hall. "We already are seeing the signs, early signs, of weakening of our job base and so much else that matters in New York."

The report, titled "Sustaining New York's and the US' Global Financial Services Leadership," warns the U.S. could lose 4 to 7 percent of the global financial services market over the next five years if it doesn't take steps.

Consulting firm McKinsey & Co. prepared the report based on interviews with 50 CEOs and polling hundreds of executives.

The United States is still world's largest financial market with $51 trillion of equities, private and government debt and bank deposits in 2005, according to the report. But markets in the UK and Asia are growing faster, and securities jobs are increasingly found overseas.

In response to the bursting stock market bubble, the collapse of Enron and wave of accounting fraud, Congress in 2002 passed the Sarbanes-Oxley Act to impose a number of corporate governance and financial control reforms.

But business groups complained these changes went too far and are driving financial markets activity off U.S. shores.

In what has become a common rallying point, the New York report notes 16 percent of global IPOs were listed in the United States last year, down from 57 percent in 2001, while Europe's share doubled to 63 percent.

The New York report calls for modifying Sarbanes Oxley, to make it less costly for smaller companies, and argues the legal environment discourages foreign companies from doing business here. The report calls for a more predictable legal environment and says more corporate disputes should be resolved through arbitration.

The findings largely echo the findings of the Committee on Capital Markets Regulation, a blue ribbon panel of academics and business leader who released their report in November.

One area where the report differs is in its emphasis on U.S. immigration policy, which New York officials said shuts the door on skilled financial and technology professionals.

That said corporate chiefs are lobbying for changes in the regulatory and legal environment at a time when U.S. stocks are near all-time highs, earnings in most sectors are booming and Wall Street firms are generating record profit and bonuses.

The report also acknowledges much of the shift in capital markets activity to foreign markets is beyond the control of lawmakers, reflecting instead efforts by other countries to make their markets more transparent and attractive. Technology meanwhile has made it easy for investors do business in any market they choose.

Still Schumer, a member of the Senate Finance Committee, said the report shows that if nothing is done, New York's economy could suffer if it becomes a second-tier financial center.

"If New York does not stay number 1 in terms of financial services, we could lose everything else," he said.

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By Joseph A. Giannone

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