While many politicians and others slam Wall Street, the securities industry advocacy group SIFMA wants to remind everyone that the engine that is the financial services industry will be a key component of the post-pandemic recovery and growth for all sectors of the U.S. economy and will spur positive ramifications across the globe.
To make its point, SIFMA has issued a whitepaper, “Financial Services and Main Street: Supporting American Economic Growth and U.S. Competitiveness.”
For starters, the U.S. financial services industry is “a major source of employment both in terms of jobs in the industry and the millions that are generated in other industries through the activities of financial institutions,” says Kenneth E. Bentsen, Jr., president, and CEO of SIFMA, in a prepared statement.
“At the same time, internationally, the industry is a major comparative advantage for the United States,” Bentsen says.
SIFMA officials are arguing via the white paper that:
- “The United States continues to lead the global economy in financial services with our capital markets as the world’s largest, accounting for 41 percent of global equity and 40 percent of global fixed income markets; domestically they fund 72 percent of U.S. economic activity.”
- “In the U.S., the positive impact of finance multiplies and helps generate much more in terms of growth and jobs than the financial sector accounts for directly. For every job in the financial services industry, 3.6 jobs are created in the rest of the economy.”
- “As for global impact, U.S. firms operating overseas raise the standards of financial services that contribute positively to financial stability and the local economy; they’re crucial in conveying U.S. values and business practices across the globe.”
- And, for the economic recovery from the COVID-19 global pandemic: “Financial firms have led the huge increase in social bond issuance to help respond to COVID-19, raising funds for healthcare provision, nursing homes, and various forms of support to low income or unemployed groups.”
In addition, the financial services industry “will play a pivotal role in ensuring the future growth of our economy — and the international economy — is sustainable. The total size of the market for climate finance in 2018 (including mitigation and adaptation) was $600 billion, and the banking and capital markets sector has made strong commitments toward achieving ambitious climate goals.”
As for international operations, “U.S. financial institutions have increased their foreign direct investment substantially in recent decades. For U.S. financial institutions operating abroad, overseas operations improve services to clients in manufacturing and other industries,” according to the white paper.
The overseas overtures have “been reciprocated with significant growth in foreign investment” in U.S.-based industries, including the more than $760 billion of foreign investment into the finance, banking, and insurance industry.
The foreign investment “helps provide additional sources of capital for a wide range of businesses. It also gives Americans access to higher paying jobs; the average wage/salary for those working for foreign headquartered financial institutions here in the U.S. is around twice that for those working for foreign manufacturing companies,” according to the white paper.
There are broader benefits, too, for the U.S. financial sector’s presence overseas as “U.S. capital is instrumental as countries develop and rebalance their economies away from exports and investment and more toward consumption — a trend which benefits world leading U.S. companies in those very industries by boosting demand for U.S. goods and services,” according to the white paper. “U.S. financial institutions operating abroad introduce greater competition in those markets, increasing their efficiency and improving the quality of global investment.”
SIFMA is also arguing that when U.S. firms operate overseas, they “raise the standards of financial services,” boost financial stability, and yield other benefits:
- “Rates of return for U.S. financial institutions abroad are higher than for foreign financial institutions operating in the U.S. – by around one percentage point per annum. This is evidence of superior U.S. competitiveness in financial services globally;”
- “Overseas footprints contribute to global efforts against anti-money laundering and terrorist financing;”
- “International financial services matched with the most liquid capital markets in the world help strengthen national security and U.S. soft power;”
- And “overseas investment strengthens activities and investment at home and benefits SMEs/the next generation of small businesses.”
So, as U.S. politicians, global authorities, and other policymakers start to reshape the post-pandemic economy, SIFMA wants them to remember that it’s “vital that financial services are integrated into the U.S. international economic strategy.”
The SIFMA white paper can be found here: https://bit.ly/3pfSTER