Thursday, July 1, 2021

As Goldman Goes, So Goes Manhattan

The mood in New York City is fast improving. Aside from a glitch in the latest primary election-- why imagine that city government could ever get anything right?-- New Yorkers are becoming more optimistic. Restaurants are opening. Theatres are beginning to catch up. Stores and shops-- those few that survived the lockdowns-- are starting to do some business.

Besides, Bill deBlasio will be out of office in half a year, and most New Yorkers are thrilled at the prospect. Of course, crime continues to metastasize, but, it’s New York, what did you expect?

That office towers are largely empty does not seem to be bothering very many people. Hip, hip, hooray for NYC. 

We, among others, have been following the comings and goings of New York’s fabled financial institutions. First among equals, though certainly not the biggest, is Goldman Sachs. As Goldman goes, so goes New York.

Well, now Goldman is expanding operations in Dallas, Texas. Zero Hedge reports on the movement out of New York. It might be because the bank wants to take advantage of a coming bull market in crude oil, but it is not going to Houston, a center of the energy industry, but to Dallas. Perhaps the bank’s leaders are Cowboys fans. Dak and Zack and Zeke-- that's probably the real reason!

Zero Hedge explains:

Now, after the bank's strategists have repeatedly (and correctly) called the run-up in crude prices, the start of what the bank believes will become the next major commodities supercycle (with crude expected to eclipse $100 a barrel in the not-too-distant future), Bloomberg reports that the storied Wall Street investment bank is looking to expand its physical footprint in Dallas.

It’s not just Dallas. There is also Florida. As we have reported, the bank has been looking seriously at moving asset management to West Palm Beach:

Since the start of the pandemic, Goldman has been aggressively expanding its presence outside of New York. The bank is also looking to increase its headcount in Florida, leading what has become an exodus of major financial firms, including banks and many major buy-side players, to the Sunshine State.

It's also notable that the bank is upping the headcount in low-tax states like Texas and Florida, while headcount has been flat in New York and Goldman's other major satellite office in the US - its tower in Jersey City, NJ (another high-tax state).

According to Bloomberg, the Dallas office could become Goldman's largest presence outside its Manhattan headquarters, part of CEO David Solomon's plan to "rein in expenses" (read: taxes - though also rent and payroll).

In other words, the bank is increasing staff in Texas Florida, while keeping its numbers flat in New York and New Jersey. Note that the Dallas office could become a very large presence. It will not merely be a satellite operation.

Goldman has offices around the world, including "strategic" outposts Salt Lake City, Singapore, Warsaw and Bengaluru. Together, these offices already account for more than one-third of the firm’s 40.5K employees. 

Like many other companies on Wall Street, the bank also has been developing plans in recent months to expand in low-tax Florida, such as West Palm Beach, where it’s adding hundreds of jobs. Some senior executives have lobbied for an even bolder push there.

So, rents are lower in Texas, and in Florida. But, the other problem seems to be that it will be advantageous for recruiting. Lifestyle matters. Apparently, young bankers are not thrilled to be working in the Big Apple, what with its ridiculous real estate prices, its awful indoctrination mills of private schools, and its crime and homelessness problem. Do you blame them?

But as BBG points out, cutting costs isn't Goldman's only reason for opening a bigger office in Dallas. While costs are a driving factor, the Wall Street giant is reportedly "betting it will have advantages in recruiting, too. Not everyone wants to live in a densely populated financial capital such as New York. And it can be easier to lure and retain talent when there isn’t also a slew of major Wall Street banks mere blocks away."

Goldman is not the only financial service company moving staff to Dallas.

Dallas has increasingly become a financial hub. Charles Schwab relocated its headquarters to the affluent Dallas suburb of Westlake, where Fidelity also has a campus. Vanguard says it will open an office in the Dallas-Fort Worth area early next year. JPM has built up a campus in nearby Plano.

Motivations aside, it's pretty clear that rising taxes in New York and New Jersey are helping to shift more jobs away from what has traditionally been America's financial capital, as states with zero income tax like Texas an Florida beckon.

And yet, high taxes are only one part of New York City's problem.


Sam L. said...

In addition, there's the Mayor and the Governor... Either one is more than enough, but TWO together!!!!!

Anonymous said...

Maybe Manhattan will 911 itself. Again.

Traffic lights and bicycles.