Now comes news that Richard Grasso was not the only executive at the New York Stock Exchange to be promised a fancy retirement.

Catherine R. Kinney and Robert Britz, two of his colleagues, are set to receive $22m each. It would not be surprising if the news triggered scrutiny from various New York watchdogs. O ne thinks of Eliot Spitzer, New York's attorney general, who stirred up NYSE's life in the first place.

But no matter where the NYSE saga goes, it reminds us of something. The city may be a global financial capital, but it is also home to a special crowd that includes Richard Grasso and Eliot Spitzer both.

Call it the "Because We're New York" crowd. Its members will cross swords, even march one another off a trading floor to a federal court house. But they all hold true to the credo: "Because We're New York".

The phrase is based on a sophism: New York will thrive because New York is a thriver. It is also rooted in a provincialism that can come from spending a lot of time in the Big Apple. St ill, a number of New York natives and transplants both place deep faith in the credo. And it is that faith, not corruption or potential corruption, that most threatens New York's future as a financial capital.

Consider the figures who gave us the NYSE debate. Mr Grasso is from Queens; he attended Pace, a local university. He spent decades at the Exchange. His colleagues attended Iona and Man hattan colleges, and together also put in decades at the NYSE.

The point is not that they would have been paid less had they gone to Harvard - in fact, two of these three did. It is that the NYSE culture is made up of people who spent their formati ve years in the New York area. Such people tend to believe that New York's financial dominance is an eternal fixture, like, say, the cliffs that rise up as you head north on Riverside Drive.

If you believe Wall Street is forever and you work on Wall Street, you tend to develop an inflated view of your importance. Mr Grasso did not spend half of his career in London and Sin gapore, where he might have acquired a reasonable sense of the appropriate price for his work. He spent it within walking distance of the Staten Island Ferry Terminal. So his conviction that he deserved his near-$200m grew undisturbed.

NYSE's watchdogs are not so different. Mr Spitzer comes from Riverdale, above the Bronx. Senator Charles Schumer, who oversees Wall Street from a Senate committee, attended James Madis on High in Brooklyn. Both men also went to Harvard, by the way. These are not self-selected markets people who gravitated to a strange city because of its growth potential. They are politicians who are involved in markets because markets are part of their home town's identity.

Mr Spitzer believes that in conducting unprecedented investigations and prosecutions he is doing good. So did another New Yorker, Rudolph Giuliani, the former mayor who was a federal prosecutor in the 1980s. Mr Schumer, one gets the feeling, believes the same thing.

This reflects another characteristic of the "Because We're New York" crowd: the provincial arrogance that overlooks the fact that cities compete for capital. Over-regulation, like high taxes, scares off that capital. Every day, US and foreign companies make decisions about whether to list on New York-based exchanges. And every day, some decide "no". Unpredictable actions - Mr Spitzer's use of an obscure New York state law, the Martin Act, as a cudgel - drive such firms away.

The "because" crowd would argue back that any number of financial troublemakers hail from California. They might also argue that they, loyalists, do a better job of keeping New York clean because they have more to lose.

These arguments have merit. A good share of New York's financial leaders and regulators - wags and heroes - are from out of town. What is more, natives' work can be world class. Mr Grasso shepherded markets through the flames of September 11. Mr Schumer has been zealous in his oversight of New York banks.

As for Mr Spitzer, his very New Yorkishness helps him identify targets. Who but a New Yorker would take seriously the idea that slots at East Side nursery schools are so hot as to be traded for changes in stock recommendations from the world's largest financial institution? Thus, Mr Spitzer netted Citigroup.

Nonetheless, the "Because We're New York" credo is so seductive it often wins over non-natives. Michael Bloomberg, the mayor, a product of Medford, Massachusetts, is one. He has developed a Bloomberg corollary: New York is forever, he thinks, "Because I made my fortune here".

A study by the Center for an Urban Future reveals that New York can ill afford such smugness. Authors Jonathan Bowles and Joel Kotkin found that the number of New York-based Fortune 500 companies - the sort whose chief executives sup with NYSE executives - keeps dropping. In 2002 there were 39, down from 42 in 1999 and 140 in 1955. Not one of America's top 20 retailers has its headquarters in New York, the old retail capital.

The point is not to bash a specific group. Rather that a city that assures itself it is an absolute victor instead of a relative competitor will, eventually, fail - because it is New York.

© Copyright 2003 Financial Times