London Is Eating New York's Lunch

Feb 29, 2012
Originally published on February 29, 2012 8:04 am

Below is an excerpt from Adam Davidson's latest New York Times Magazine column, "London Is Eating New York's Lunch." Read all of Davidson's Times Magazine columns here.

If you follow the flow of money around the world, you might be surprised to find that the central node of global finance, the place where money passes through most often, is London, not New York. Wall Street, of course, is no piker. American investment banks — partly because the U.S. economy is the largest in the world — do more business and make more money. But when it comes to international transactions, London is the world's financial center. ...

How did London surpass Wall Street? ... In 1986, Margaret Thatcher instituted what's known as the Big Bang, which blew up centuries of regulations protecting Britain's old, slow-moving firms. In an instant, the City of London went from a charming, ancient system of legally protected, relatively small institutions to electronic banking, enormous investment conglomerates and millionaires who made their money via speculative bets. Out were the Oxbridge set and oak-paneled rooms. In were ambitious young men with Cockney accents and walls of Bloomberg terminal screens. ...

But after the crisis, things flipped; there were heightened calls for tougher regulation on both sides of the Atlantic. In the City of London, the plea was amplified by the fact that the meltdown was caused, in part, by A.I.G.'s financial-products group — remember, the one that opened offices in London and traded its risky credit-default swaps in the lax regulatory atmosphere?

Read the full column here.

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