According to the latest projections, more than 250,000 jobs will be lost in the American banking sector due to the ever deepening economic turmoil.
That Merrill Lynch, which in 2008 held assets in excess of $1 trillion, can be pulled under the leaking umbrella of Bank of America in search of shelter, is a telling indicator indeed of the how deep the wounds inflicted on the financial sector have become.
Some 12% of the staff total resulting from the shareholder-approved merge however, face a bleak and uncertain 2009 and beyond as the bank attempts to tighten its belt to the tune of $7 billion. “Bank of America expects to have a final plan early in 2009 and estimates it will project the reduction of approximately 30,000 to 35,000 positions over the next three years,” said a statement issued by the North Carolina based firm in early December.
It continued; “details as to specific reductions in communities or by business line have not been determined”. It is expected that the final plans for the lay-offs will be completed early in the new year, leaving thousands of American families unable to fully enjoy their much needed and much deserved holiday season. It is inevitable that these cuts will lead to branch closures, which undoubtedly have a wider impact on the surrounding communities.
The unavoidable blows to the unlucky workers will only be mildly softened by confirmation that attrition will play as big a part as possible, and severance pay to laid-off workers, reputedly at 2 weeks pay for every year of employment, will provide something of a parachute for staff with long service records.
Only the recent news of Citigroup pay-offs has lessened the shock at the scale of the Bank of America plans. Citigroup, who continue to lick their sores following dreadful risk management strategies leading into the economic downturn, will have laid-off a staggering 28% of its 300,000 employees worldwide by the end of 2009. The New York based financial behemoth has seen $25 billion written off in the financial turmoil of the last year alone, and received the same guarantee amount from the US treasury under the TARP arrangement in October 2008.
Less than happy new year?
Bank of America’s management teams will begin planning the cutbacks in the new year, and changes to the structure of “toxic” mortgages in tandem with the sudden discharging of 20 senior positions, are gritty attempts to lure investors with what may seem a discount buy-in. These bold bids to rein in a tumbling share price seem ever increasingly the only possible improvements the firm can make, with few buyers of the bank’s vast assets, and new investment thin on the ground.
In more stable financial waters, considerably more disquiet would result from such deep and broad cuts to staff numbers, nevermore than soon after such unprecedented financial injections from the US taxpayer. It is unfortunate however, that mind-boggling sums of money donated to failing financial giants, do not necessarily equate to mind-boggling performance or stability. Indeed while we marvel at the thought that these amounts do not guarantee the jobs of the taxpayers from whom they were taken, there is no guarantee that rope which ties the Bank of America to its flailing mast will hold for good.
The taxpayers, by proxy and without consent, are making hard-nosed business decisions, hopefully for the greater good of the remaining staff who rely on their management teams to shape leaner, fitter financial operations.
It would perhaps be naïve, to think that these cuts are contrary to the directions of the US treasury. The treasurers are under a moral obligation to deliver as much return as possible on these highly controversial relief programs, and a bloated business has little chance of survival in the years ahead.
If this is the worst punch thrown at American livelihoods during the current bout of financial hardship, countering the attitudes of ever-prudent investors will be crucial. However painful the immediate scar may seem, it may yet prove to be turning point that prevents misery turning to catastrophe.