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The Sunshine Economy

How Finance Keeps South Florida Industries Together

Tom Hudson

When HanmingRao was setting up his commodity trading fund, he began the process in Stamford, Conn. After all, Rao had worked for hedge funds in Connecticut after graduating with his doctorate in engineering sciences. But he knew he would move his operations to South Florida soon. This spring, he did becoming another investment professional attracted to the region's weather, source of wealthy investors, global location and no state income taxes.

Economic development officials in Miami and Palm Beach County have worked on attracting fund managers like Rao to the region. The $6 billion Universa Investments* is among the largest to make the move. It left California earlier this set to set up shop in Coconut Grove. But these businesses don't bring with this loads of new jobs. The head counts at these funds can be just three people. But the economic development agencies say what hedge funds don't bring in jobs is more than made up for in the amount of money their payrolls pump into the local economics. The few jobs these funds have tend to come with six and seven figure pay.

Monday's Sunshine Economy talks with hedge fund managers about the lure of low taxes and good weather, and why they think their few but high paying jobs are important diversifying the South Florida economy.

Five years after the Great Recession, Florida bankers are optimistic the current economy recovery is sustainable. They point to home buyers using less borrowed money and continued interest in South Florida real estate and other opportunities by foreigners. National banks certainly are interested in Florida. Three of every four dollars Floridians have in bank deposits are in banks headquartered outside the Sunshine State. 


Florida is the most populous state with the highest percentage of bank deposits held at out of state headquartered banks. Critics like independent banking consultant Kenneth Thomas call Florida a banking colony. It is true that the biggest banks in Florida aren't based here.  Thanks to banking consolidation and other forces, large national banks like Wells Fargo, Bank of America and Citigroup have big share of Floridians' deposit money.

Bankers agree that regulations have been stepped up since the loose lending days fed into the real estate bubble that popped six years ago. In addition, the South Florida continues to be a magnet for dirty money. Cash generated from illicit business here and aboard has a history in this region and financial regulators pay particular attention to the financial industry here, say banking executives. For good reason, the U.S. Treasury Department's financial crimes unit reports the great majority of suspicious activity reports filed by financial institutions in Florida are generated from firms in South Florida. Jacksonville and Orlando are a distance second and third.

Bank executives tell the Sunshine Economy they don't want dirty money. But its here. That's why financial cops pay close attention to South Florida's financial industry. And that attention comes with a higher cost of doing the business of banking.

In 1991, a different recession cost Southeast Bank its business.  It has been more than 20 years but in South Florida financial circles, Southeast Bank still is mentioned with reverence.  For decades it was the standard in Florida finance, culture and philanthropy. But the real estate bust of the early 1990s hit it hard and federal authorities seized the bank in September 1991. Bill Brandt was eventually hired as the bankruptcy trustee and he didn't make a lot of friends. He sued former bank board of directors and even the FDIC, which seized the bank and sold it. He remembers one meeting of Southeast Bank's creditors as if it were a "Jerry Springer" show. The bank didn't survive but it's reputation lives on with financial industry veterans.

* Editor's note: An earlier version reported Universa's assets under management at $2 billion. Universa assets reportedly are $6 billion.

The Sunshine Economy
In a journalism career covering news from high global finance to neighborhood infrastructure, Tom Hudson is the Vice President of News and Special Correspondent for WLRN. He hosts and produces the Sunshine Economy and anchors the Florida Roundup in addition to leading the organization's news engagement strategy.