Stock Market Crisis: Nation's Mayors Sound Off
From New York City to Indiana, the Wall Street crisis is hitting cities across the country. CNBC talked to three mayors from three diverse regions of the United States to learn which economic problems are affecting them most.
'Wall Street West' Feels Wall Street's Pain
Dubbed "Wall Street West" due to its close proximity to the financial epicenter, Jersey City, N.J. is home to 260 financial firms and 24,000 financial-sector jobs, which make up almost one-third of its workforce.
Despite the city's exposure to the financial industry, Jersey City Mayor Jerramiah Healy is remaining cautiously optimistic.
"We still feel we have a lot to offer, but certainly everyone is concerned about what’s happening on Wall Street,” he said.
Among Jersey City's 24,000 financial-sector jobs, 1,700 are at Lehman Brothers , 1,500 at Merrill Lynch and 200 at AIG .
“Four weeks ago when this started to unravel, we felt we were in jeopardy of losing a lot, maybe all, of those jobs,” he said. “We haven’t lost any jobs yet. Bank of America came in and bought out Merrill Lynch, Barclay’s of London has stepped into Lehman Brothers and AIG was helped by all of us."
Healy said Jersey City is not currently having cash-flow problems, but he expects to see some in the near future.
“Normally to do capital improvements, fix our parks, fix our buildings, those types of expenditures...(the city will) go out for bonds. Right now we’re hearing that market’s going to dry up...So we and every other government…(are) probably going to have to tone down (our) expectations for capital improvements.”
Credit Concerns in the Midwest
Franklin, Ind., an industrial town south of Indianapolis, is starting to feel the reverberations from Wall Street, Fred Paris, the town’s mayor, told CNBC’s “Squawk on the Street.”
Automotive-related businesses are seeing fewer orders and the insurance company that insures the city’s bonds has been downgraded.
“We just got notice that the insurance company that insures those bonds' rating has been lowered, which also affects our ability as a city to borrow money,” he said.
Although Franklin’s tax base remains solid and the employment outlook looks optimistic with a new Cooper Tire facility moving in, the city is “crossing our fingers that we don’t lose those new jobs,” he said.
The town is concerned about whether the $700 billion government bailout will cut into capital expenditures on infrastructure.
“We’re just getting ready ... to take on about a $5 million road project, which isn’t a lot of money to some people, but it is to a small town like ours, and suddenly we find ourselves wondering, you know, with $700 billion going for this, will there be money for the small projects and small communities across the country?” Paris said.
Muni Troubles in New England
Meanwhile, New Haven, Conn. faces two growing problems: credit liquidity and intergovernmental revenues.
"We borrow for construction—last month when we went into the short-term market—no problem getting 30-day paper for two percent," said New Haven Mayor John DeStefano. "This week we couldn't get 30-day paper."
The municipal bond market has also suffered as a result of the credit crunch, DeStefano said.
"We had to cancel a bond sale three weeks ago—same day that Connecticut was only able to sell part of the debt it was issuing," said DeStefano. "When the state of Connecticut catches a cold, we run the chance of getting pneumonia."