Darien, Conn., tops the list of towns that could be worst affected by the financial crisis.  (© Flickr: floralgal/BusinessWeek)

Darien, Conn., tops the list of towns that could be worst affected by the financial crisis.

How many former Lehman Brothers bankers or AIG executives are likely to be buying a Park Avenue apartment or a home in Darien, Conn., this year? Most likely answer: not many.

As anyone who works on Wall Street, invests in the stock market or just reads the newspapers knows, the past few weeks for the financial sector have been as ugly as Frankenstein's sister. People have seen their net worth eviscerated, if not obliterated.

But Wall Street's woes are going to have a direct impact on communities around the United States — and not just because the proposed $700 billion bailout would result in higher taxes for most Americans. The pain will spread beyond the banks themselves to their back-office and IT operations, accountants, lawyers and other professional-service employees who depend on work from finance companies. It will also reach regional banks across the country. Credit-card companies and firms that deal with auto loans are also vulnerable as the credit market tightens. Even insurance companies, which have remained relatively strong, could be hurt if the economy worsens and workers drop existing policies and decide not to take on new ones. From CEOs to security guards, the financial, insurance and real-estate sectors employ approximately 9.8 million people in the U.S. alone — nearly 7% of the entire American workforce — and their spending potential is even greater.

Slide show:  See the 10 communities that will likely be hardest hit by the fiancial crisis.

New York's ripple effect
Moreover, many of these jobs often tend to cluster around certain towns; bankers in one community and tech support in another. And while Manhattan is at the center of the turmoil, the fallout will be nationwide. Already the financial sector alone has lost 10,000 jobs through July, or about 2% of finance jobs. Moody's Economy.com projects that New York City and its suburbs will lose 65,000 finance jobs by the middle of 2010, or 11% of the total.

Economists are projecting that Manhattan real-estate prices will finally sink under the pressure of financial-sector layoffs and shrinking Wall Street bonuses. Wall Street accounts for about 12% of jobs in the city of New York and a quarter of salaries.

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"New York is the stone in the puddle that ripples across the country," says Scott Simmons, vice president and founding partner of Crist/Kolder Associates, an executive recruiting firm in Chicago.

Smaller cities could feel it more
In other words, smaller financial centers and their suburbs could also see trouble ahead. BusinessWeek.com worked with PolicyMap.com, a Philadelphia-based online data and demographics site, to rank the communities with the largest percentage of residents working in finance, real estate, insurance and leasing. Topping the list is Darien, Conn., an affluent New York suburb where the median salary is $168,000 and 27% of residents work in those industries. Bloomington, Ill., home of State Farm Insurance, came in second, followed by Hoboken, N.J., which is across the Hudson River from Wall Street.

But the impact of a downturn could be more serious in smaller cities that are less diversified. Wilmington, Del., where many of the nation's credit-card companies are headquartered; Charlotte, N.C., home of Bank of America and Wachovia; and Sioux Falls, S.D., where many back-office jobs are located, each have about 15% of residents working in finance, real estate and insurance.

Jeremy Nowak, president of The Reinvestment Fund, a nonprofit group in Philadelphia that operates PolicyMap.com, and a board member of the Philadelphia Federal Reserve, says the towns on the list aren't necessarily in trouble yet. Much depends on the health of the local employers and the mix of businesses. Not all banks, for example, are doing badly, he said. And the insurance industry is, so far, relatively healthy, despite the troubles besieging industry giant American Insurance Group.

"These are places to watch," Nowak says. "This will be the starting point for investigation, and not the answer."