You hear a lot of talk about the panoply of problems facing Wall Street, from the Volcker Rule to derivatives regulations to today’s Congressional hearing on whether exchange-traded funds are going to blow up the economy (answer: maybe). But here’s a simple numbers comparison that points up the challenge for Wall Street (and New York). From the New York Times‘s Dealbook today on Goldman Sachs’s second-ever loss as a public company:

In the last nine months, Goldman’s return on equity fell to 3.7 percent on an annualized basis, down from 10.3 percent in 2010. Five years ago, it was 32.8 percent. Morgan Stanley, which is set to report earnings on Wednesday, posted return on equity of 8.5 percent last year, versus 23.5 percent in 2006.

What’s that mean? Shareholders are getting only single digits in terms of percentage return for their investments in Goldman or Morgan stock. Why so low? Oh, you can blame all kinds of things, but, more or less, firms like Goldman and Morgan aren’t able to borrow as much money per share as they could five years ago (yes, it has been that long since the financial crisis started). All that borrowed money juiced up returns on the shares. Less borrowing = less juicy shareholder returns. The problem is that nobody in their right mind would invest in a stock like Goldman — which could lose all of its value in a week in some kind of crisis that nobody could have anticipated — for a measly 3.7 percent annual return. It’s debatable whether one should make such an investment for a twenty percent return. Goldman’s business, then, doesn’t justify a big cost of its doing business in the first place: paying the shareholders. Could that change? Sure. Lots of things could happen. In the meantime, though, New York City (and state) have a lot of thinking to do. Their economies and budgets depend on a business that itself depends on the suspension of the most fundamental investment equation: you need a return that justifies the risk.