Cutting Bank Risk Means Cutting Jobs: DiNapoli

NEW YORK ( TheStreet) - The bloodletting on Wall Street is the unfortunate, but necessary, result of reducing the risk taking by the banks, says New York State Comptroller DiNapoli.

"Excessive risk-taking on Wall Street was a major factor leading to the financial crisis and the recession," DiNapoli said in a statement released Tuesday. "Regulatory changes that reduce risk and focus attention on long-term profitability rather than short-term gains will enhance stability. Despite the weaknesses we are seeing, the securities industry remains profitable and is a key component of the economies of New York City and New York State."

Wall Street may cut 10,000 jobs by the end of 2012, the New York State Comptroller said in a report.

After adding 9,900 jobs between January 2010 and April 2011, the securities industry in New York City has shed 4,100 jobs since April 2011 through August, according to the report.

More layoffs are on the horizon as the European debt crisis, a sluggish domestic economy, volatile stock markets and regulatory changes weaken the outlook for Wall Street.

Bank of America ( BAC), Goldman Sachs ( GS), Bank of New York Mellon ( BK) and Wells Fargo ( WFC) are among those who have announced payroll cuts.

>>13 Banks Slashing Jobs

"The securities industry had a strong start to 2011, but its prospects have cooled considerably for the second half of this year," DiNapoli said. "It now seems likely that profits will fall sharply, job losses will continue, and bonuses will be smaller than last year."

The combined impact of higher layoffs and lower cash bonuses is expected to hurt New York City and State budgets.

According to the Office of the State Comptroller, last year securities-related activities accounted for 14 percent of New York State's tax revenues and almost 7 percent of New York City's. In addition, one in 8 jobs in New York City and 1 in 13 jobs in New York State are linked to the securities industry.

The sector also has a multiplier effect in the local economy. The State Comptroller's Office estimates that each job gained (or lost) in the securities industry leads to the creation (or loss) of almost two additional jobs in other industries in the New York City and another job elsewhere in New York State.

The securities industry, which accounted for only 5.3% of all private sector jobs in 2010, accounted for 23.5% of all the wages in the private sector. The average salary in the securities industry in 2010 grew by 16.1 percent to $361,330, 5.5 times higher than the average salary in the private sector of $66,120.

That portion of the data is likely to give further ammunition to Occupy Wall Street protesters who call themselves the 99%- and are arguing for economic equality.

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--Written by Shanthi Bharatwaj in New York

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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