by Beth Connolly,
Last week, the Wailing Wall SJ reported that big banks including Citigroup Inc., Goldman Sachs, J.P. Morgan Chase, and Morgan Stanley were preparing for sweeping layoffs that would include senior bankers and deal-makers.
Today, Fortune reports that these layoffs will total 21,000 positions cut across the financial sector in New York City alone–a number that rivals the amount of jobs cut as a result of 2008′s financial crisis.
“Large layoffs are a virtual certainty,” said veteran financial industry recruiter Steve Potter at Odgers Berndtson in Fortune.
Yet unlike the financial crisis layoffs four years ago, this wave of downsizing comes on the heels of tentative economic recovery and modestly optimistic earnings reports from the first quarter of the year.
And it is true that smaller banks and boutique firms are snapping up talent, so the net result in the financial sector of the job market may not be as devastating as first appears. But can smaller institutions grab talent as quickly as bigger institutions shed it?
Regardless, bankers should expect to see compensation decrease by roughly 30% overall this year, according to Fortune.
Major layoff alerts currently are in place for Credit Suisse, which said last year it planned to eliminate 3,500 positions in total, 2,000 of which have already been effected. Experts predict that the remaining cuts will come in Credit Suisse’s investment bank.
Bank of America and Barclay’s are also expected to trim their investment banking divisions.
Here’s more from Stephen Gandel at Fortune:
Consultants say the big Wall Street firms are coming to the conclusion that they have more workers than they need. Last week, The Boston Consulting Group released a report that predicted banks would eliminate 12% of their workforce in the “short-term.” Recruiters say those numbers sound similar to what they are hearing from the large firms….
Perhaps the biggest problem at the banks is that they didn’t cut enough jobs last time around. Mergers and acquisition activity also has not bounced back as expected, leaving a number of high paid bankers idle. What’s more, new regulations appear to already be significantly curtailing the banks’ trading operations. Also weighing on the banks is the fact that debt watchers Moody’s and Standard & Poors say they are likely to soon downgrade the bond ratings of the firms. The nation’s five largest banks have estimated that the downgrades could cost them $22 billion in additional costs or collateral requirements.
“There hasn’t been enough action on the cost front to keep up with the revenue short falls,” says Chandy Chandrashekhar, a partner at BCG who helped to produce the recent report....and all those cuts will Not be enough, they need to return to the rules of Glass Steagal so that these overly large financial services corporations can be broken up into smaller, leaner companies that focus on a ethics, less greed and utter corruption and a segregated business line, as per Glass-Steagal.... The individual companies will all need employees and you would likely see a need for more workers rather than a glut of workers. I suspect the accounting shenanigans that keep these essentially insolvent giant corps afloat are at the heart of the reason this has not been done….