The US is at risk of losing its edge as the world’s financial markets leader because of continued growth in Europe and Asia according to President George W Bush and Treasury Secretary Henry Paulson. With record profits, earnings and bonuses on Wall Street, it is hard to fathom that the party could be over. But the fact is there is a strong motivation for US and foreign companies to abandon Wall Street and move towards overseas markets.Two studies — one conducted by McKinsey & Co. for New York Mayor Michael Bloomberg and New York Senator Charles Schumer, and another done by a group of executives and academics - have concluded that excessive regulation is making the US an unattractive place to sell new stocks. (Bloomberg is the founder and majority owner of Bloomberg LP, the parent of Bloomberg News.)

In particular, the reports single out the Sarbanes-Oxley Act of 2002, the antifraud law passed after the debacle at Enron Corp and WorldCom.

Unless drastic action is taken — including revising the way Sarbanes-Oxley regulations are followed — New York will lose its spot as the world’s financial capital, according to McKinsey. The134-page report says reveals such an upheaval would jeopardize 30,000-60,000 US. Jobs.

The McKinsey report says the US can’t afford to wait. To help American markets compete, the US government should ease immigration restrictions, so banks can attract more talent from overseas, and take steps to curb costly litigation, the study says.

A third study by U.S. Chamber of Commerce is due out in March. At that time it is expected that Henry Paulson, former chief executive officer of Goldman Sachs Group Inc., will convene a conference in Washington to respond to these issues.

“America’s capital markets are the deepest, the broadest and most efficient in the world,’’ Bush said in his January 31 State of the Economy report, which he delivered at Federal Hall, across the street from the New York Stock Exchange. Yet excessive litigation and overregulation threaten to make our financial markets less attractive to investors, especially in the face of rising competition from capital markets abroad.’’

His warning was echoed by similar comment made by Paulson to former Wall Street colleagues in November.

In a speech that Paulson made at the Economic Club of New York, he stated “Historically, the U.S. markets have represented the gold standard,’’ Yet recently, in the wake of new, heightened regulatory and listing requirements for all public companies in the US, we have witnessed changes in IPO activity.’’

However, there warnings seem to be falling on deaf ears. U.S. financial firms have never been more profitable.

The five biggest firms on Wall Street made more than $60 billion in net income last year. Citigroup Inc., Goldman Sachs, Morgan Stanley, JPMorgan Chase & Co. and Merrill Lynch & Co. —all based in New York — collected more fees from underwriting securities and advising on mergers and acquisitions in 2006 than any other firms, according to data compiled by Bloomberg.

Their employees around the globe pocketed an estimated $60 billion in bonuses. In all, investment banks worldwide collected $71 billion in fees from M&A and underwriting, the most since Bloomberg began keeping records.

The Foreign Threat to Wall Street

With the emergence of China, India, the Soviet Bloc along with the political and economic integration of Europe, Wall Street is losing the battle to retain its leadership role in the global financial markets. NY no longer commands the dominate presence it once had. In the past few decades, a confluence of powerful forces from foreign shores has discovered what the US has enjoyed for over 200 years – CAPITALISM.

“In the 1980s, the only place was the US,’’ says Robert Steel, US Treasury undersecretary for domestic finance. “Now, there is much more competition.’’

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