NY State Comptroller Thomas DiNapoli Talks Profits, Hidden Risks

SPEAKER_1 (0:02)

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Dani Burger (0:07)

Now changing gears here, we welcome now our Bloomberg TV audience and radio listeners. New York State Comptroller Thomas DiNapoli is with us on his latest report on New York City security industry and Wall Street's bumper year. Tom, thank you so much for joining in. What a bumper year it is. If the pace continues, $90 billion.

A record haul obviously great for New York City and New York State. But as that record haul comes in, I wonder how you're viewing it. Is this sustainable fundamentals for the banking sector and thus something to celebrate, or are you concerned that it's something being driven by just temporary volatility especially around AI?

Thomas DiNapoli (0:48)

Certainly, money is being made from volatility, and you're absolutely right, AI is fueling a great deal of the activity, the debt issuance. We also see a lot of activity, merger and acquisitions, IPOs, and just general trading. How long this will last, we don't know, but for now, certainly to have first of the year profits over 50 percent ahead of last year. And as you point out, we project if the trend holds by the end of the year, it could be a real record year, $90 billion in profits from the securities industry in New York City. We track this because of the impact on tax revenue for New York City and for New York State. And when Wall Street does well, our state budget, our city budget benefits helps fund all the other programs that New Yorkers care about.

There's a lot going on, a lot of uncertainty out there, but at least for now, the volatility, the geopolitical dynamic is not hurting Wall Street's ability to turn a profit.

Dani Burger (1:47)

Just with that, so if we get into the numbers, Tom, so state tax receipts from the industry, $26.3 billion, that actually trails the record, even though the record is setting a new record. Why are state tax collections lagging behind the historic profit that Wall Street is seeing?

Thomas DiNapoli (2:06)

Well, those are still very, very strong numbers.

I wouldn't minimize that. In fact, as a percentage of a tax revenue to the state, you're talking about this one sector of the economy contributing about 21% of our tax revenue. That percentage, in terms of the overall tax revenue, has actually gone higher in recent years. So I think it's still a good new story as far as the tax revenue.

Dani Burger (2:29)

Well, I guess, Thomas, part of the reason I asked that is just about the overall environment and what we've seen from this federal government. To get specific about it, has the One Big Beautiful bill changed things in terms of just what you would have been collecting in the past?

Thomas DiNapoli (2:43)

We haven't done an analysis of that. It's probably an interesting question for us to look at.

But for now, what's very good is that it's not only the profits that we're talking about right now. This also, if this trend continues, you're probably going to see a record increase in the bonus pool for next year. Those numbers won't come out till next March, which is just around the time the state budget is being finalized. So when you consider the fact that, for instance, New York City had been planning on the bonus numbers to go down, there's a tremendous upside on the revenue picture for the city and for the state as well. Because the budgets are based on projections, right? So the state had projected an increase in terms of profits and certainly the bonus pool as well, but we're seeing bigger numbers than we had anticipated. So again, things could change by December 31st, but at the pace we're going, there's a tremendous upside in terms of tax revenue for the city and for the state.

Dani Burger (3:39)

The numbers are great, and I'm sure Wall Street and their workers who are seeing those bonuses are quite elated. Still though, there's this regulatory and tax friction that I think remains top of mind for a lot of financial executives, specifically around New York City and Mayor Mom Donnie. How would you say the relationship between the mayor and this industry is taking form? What are bank CEOs telling you behind closed doors about working with City Hall?

Thomas DiNapoli (4:05)

Well, look, it's still a relatively new administration. So I think it'd be fair to say the jury is still out in terms of long-term, what the relationship will be. The good news is New York City continues to be the global capital for finance. We've actually been adding jobs in the security sector over the past couple of years, contrary to what a lot of people have been assuming.