Wall Street Braces For Layoffs And Lower Bonuses

The national wave of layoffs may have finally reached the financial sector.

As Wall Street profits shrink, big banks may soon resort to firing employees and cutting their pay to boost profits, CNBC reported Tuesday. It's the same strategy other companies have been using: Massive layoffs allowed corporate America in the second quarter to net its sixth-highest quarterly profit ever, even as revenues declined.

The process has already begun. Bloomberg Businessweek reported last week that Bank of America will cut between 20 and 30 jobs from its proprietary trading desk. JPMorgan has also put employees on notice. And D.E. Shaw, the world's third largest hedge fund, CNBC reports, has cut 10 percent of its workers.

Goldman Sachs, often criticized for doling out huge bonuses to employees, has reduced its percentage of revenue devoted to the payroll, CNBC says, to 43 percent, compared to a historical average for the industry of about 50 percent.

As the Wall Street Journal reported yesterday, banks are trying to become more "boring," to borrow a word from Paul Krugman, as they re-focus on their traditional business practices. The shift comes in response to falling trading volum,e but also to anticipated tighter regulations from the summer's financial reform legislation and from last month's Basel III accords.

Analyst Meredith Whitney, who famously predicted Citigroup's demise in 2007, said last month in a report that banks should expect "structural changes," according to the Wall Street Journal, as she predicted the U.S. financial services industry would cut between 5 and 10 percent of its workers. Later in the month, she told CNBC's Maria Bartiromo the industry would fire about 80,000 workers, starting in the first quarter of next year.

"I think that the bonuses are going to be really, really bad at [2010] year end," Whitney said.

Comments

[nobodysgirl]

12:48 PM on 10/08/2010

Awwwww, poor fellas.

[she343]

11:13 AM on 10/08/2010

it is probably not legal but I would love to see every company that has to cut expenses by reducing employee pay to have to reduce ALL levels-starting with CEO--if you can't afford a 50k secretary-you can't afford an extra 50k in top management's pay package---if unions lose benefits-managers should loose "perks"--what are golden parachutes but retirment packages for the rich?

[dragonladywaltham]

10:40 PM on 10/07/2010

Boo Hoo. They should start with those who make the most money and "trickle down"!!!!

[Duppy]

06:33 PM on 10/07/2010

The first to go: women, minorities and over 40. Only the white good old boys club will be left.

[QuantProgrammer]

04:53 PM on 10/07/2010

Two quick points:

1.) Not everyone who works on wall street and gets bonuses makes six, let alone seven figures.
2.) For a lot of people like secretaries, accountants, technologists, etc, bonus still makes up a sizeable portion of their compensation.
3.) $100K pre-tax in NYC gets you as far, after tax, as $40K in Texas.
4.) Many of these people work 80 hours a week or more.

Don't feel bad for these people, but it's best not to gloat too much either. Many of these people don't have it a whole lot easier than the average American.

[duhtruth]

04:52 PM on 10/07/2010

I'll bet the big execs will not see layoffs or decreased bonuses. Only the flunkies!

[twoto2]

02:54 PM on 10/07/2010

Boo Hooo....
Businessman that are holding onto 1.7 trillion on the side lines kept saying they can't make a move because of confusion as to the tax structure of the future or something close to that argument and yet manage to us the pile of money to buy back stock. And the GOP keeps saying that tax cuts of the rich would hurt small business's. Or 'job killing' as they like to say. And all this extra money the rich get from this tax deal, they haven't created any jobs yet. Big Business does NOT have deficits, but the country does. The rich REFUSE to help the country that help make them wealthy. This is the most anti-American action I've ever seen.

[Rodger leMonde]

11:56 AM on 10/07/2010

No news here, it's the usual blame for the workers, praise and bonuses for the uninvolved.

[mitsie]

09:15 AM on 10/07/2010

Someone needs to ask this question, given the millions of dollars that we the taxpayers gave to Wall Street, are they threating to lay off their own people? Are the CEO's who earn billions going to be laid off, no it will be the cleaning people, some new techs, and other non essential personnel. Wall Street has been making billions, what have they done with the money, gambled it away with diratives?

I don't think anyone on Main Street will feel sorry for these people, with the exception that it will be the lower class on Wall Street who will suffer. I hope there are some whistle blowers who will come forward and tell us people on Main Street what is going on.

BTW how convenient, they want to lay off people one month before the mid terms!!!! This is just a motion they are going through to get Republicans election and do away with W.S. reform. I don't know why the public can't see this.

[guveqzero]

01:01 PM on 10/07/2010

The new business model of US Capitalism is to reduce the workforce to a minimum and expand overseas. They view the US worker as a liability and not an asset. Until that changes, forget any chance of recovery. Pretty easy for the typical worker to understand why. But, the policy makers don't have a clue. Until they act to put back in balance the relationship between the worker and the US corporation, our society will suffer. FDR's second bill of rights would be a great start.

[golf1010]

08:24 AM on 10/07/2010

Who cares see ya at mcdonalds

[battleofmarathon]

06:27 AM on 10/07/2010

We do not need Wall Street to grow our economy. Due to it's emphasis on quarterly cycles (instead of long-term growth) it's precisely Wall Street that has created our bubble economy. Bubble economies are good only for the highly connected and incredibly intelligent people who can stay ahead of each bubble.

Capital investment should be illegal. If a company cannot grow on it's own, it shouldn't grow. Investing in commodities without actually taking physical control of your investment should be illegal. The derivatives market should be banned. Credit cards beyond 10% of your annual income should be illegal.

We have given our lives wholly to these merchantmen! Take it back!! Get off the grid, learn how to farm, hoard your money!!!

[CarmanK]

02:18 AM on 10/07/2010

so the bad economy has finally hit Wall Street! Really feel bad for those people who got million dollar bonuses while the repugs were willing to feed main street dog food. a of course don't forget where the repug small government has brought us to in the South. They have a la carte fire services in Obion, TN where first responders watched a man's house burn and kill the family pets. This simply immoral and clearly unjustifiable is an abomination. BUT the atrocities that occur in the BIBLE BELT where so called christians reside and reign never fail to shock!!

[GeoLee]

01:10 AM on 10/07/2010

Yes, the CEO level with eat their own while they are making higher profits and higher CEO salaries. Get used to it American. The CEO oligarchy is in charge.

[scottymac11]

12:04 AM on 10/07/2010

If I made millions in my personal pocket last few years. Lay me off ? I ain't but so greedy. Heck I quit!

[GoAllTheWay]

11:17 PM on 10/06/2010

pick dem bones, pick em clean!

[One more Thing]

12:03 AM on 10/07/2010

Then lay low for awhile!

#102