Layoff Woes Continue On Wall Street
8/20/2007 3:15:45 PM Recent blood-letting in the home loan business has caused a slew of layoffs at a number of companies, including Bear Stearns and Countrywide Financial. While many Wall Street companies have already slimmed down after the credit squeeze and mortgage woes, some analysts expect the carnage to continue.
Bear Stearns announced last Wednesday that some 240 employees at a Bear Stearns lending unit had been laid off. The cuts come almost a month after the firm saw two hedge funds crumble, costing co-president Warren Spector his job.
Following in the heels of Bear Stearns, SunTrust Banks announced this Monday that it plans to lay off nearly 2,400 employees as part of a campaign to overhaul the bank, almost a tenth of its workforce. SunTrust hopes to save $530 million annually by 2009 with the reorganization. The company's spokesman, Barry Koling, told Forbes.com that the decision to eliminate jobs came after an extensive internal study over the course of several months. However, Koling also stated that the latest move had nothing to do with current mortgage and credit issues.
Yet another company, Countrywide Financial, also had to cut jobs in one of its loan origination units. It's unclear as to how many people were let go, but as of June the branch consisted of 6,785 employees. The entire loan origination unit employs 18,091. The layoffs came after the lender stated it would have to draw on an $11.5 billion credit line to ease its liquidity squeeze. After the announcement, all three ratings agencies cut their ratings on the company's senior debt.
The layoffs started at the beginning of the month, when American Home Mortgage Investment closed its doors. The company revealed that it was unable to make payments on about $800 million of debt, and its short-term credit lines had been revoked. Previously, American Home had blamed its troubles on disruptions in the credit market. Though the company did not give sub-prime mortgages, the firm noted that the meltdown caused the value of its assets to decrease significantly.
After the layoffs at Bear Stearns, some analysts, including Jim Cramer, have predicted even more bloodshed in areas tied to credit markets and hedge funds. While others at Wall Street dismiss the idea of further worries, history points the other way. Following the tech bubble burst, investment banks and brokerages laid off up to 25% of their work force.
Headhunters remarked that the meltdown in financial markets will likely lead to more cuts on Wall Street. However, end of the year bonuses appear safe for now. Alan Johnson, managing director of Johnson Associates, told CNN that he expects bonuses to top the record $23.9 billion posted by Wall Street firms last year. Johnson noted, however, that he anticipates they will fall in 2008. Meanwhile, others say it's still too early to forecast a downturn.
Bear Stearns announced last Wednesday that some 240 employees at a Bear Stearns lending unit had been laid off. The cuts come almost a month after the firm saw two hedge funds crumble, costing co-president Warren Spector his job.
Following in the heels of Bear Stearns, SunTrust Banks announced this Monday that it plans to lay off nearly 2,400 employees as part of a campaign to overhaul the bank, almost a tenth of its workforce. SunTrust hopes to save $530 million annually by 2009 with the reorganization. The company's spokesman, Barry Koling, told Forbes.com that the decision to eliminate jobs came after an extensive internal study over the course of several months. However, Koling also stated that the latest move had nothing to do with current mortgage and credit issues.
Yet another company, Countrywide Financial, also had to cut jobs in one of its loan origination units. It's unclear as to how many people were let go, but as of June the branch consisted of 6,785 employees. The entire loan origination unit employs 18,091. The layoffs came after the lender stated it would have to draw on an $11.5 billion credit line to ease its liquidity squeeze. After the announcement, all three ratings agencies cut their ratings on the company's senior debt.
The layoffs started at the beginning of the month, when American Home Mortgage Investment closed its doors. The company revealed that it was unable to make payments on about $800 million of debt, and its short-term credit lines had been revoked. Previously, American Home had blamed its troubles on disruptions in the credit market. Though the company did not give sub-prime mortgages, the firm noted that the meltdown caused the value of its assets to decrease significantly.
After the layoffs at Bear Stearns, some analysts, including Jim Cramer, have predicted even more bloodshed in areas tied to credit markets and hedge funds. While others at Wall Street dismiss the idea of further worries, history points the other way. Following the tech bubble burst, investment banks and brokerages laid off up to 25% of their work force.
Headhunters remarked that the meltdown in financial markets will likely lead to more cuts on Wall Street. However, end of the year bonuses appear safe for now. Alan Johnson, managing director of Johnson Associates, told CNN that he expects bonuses to top the record $23.9 billion posted by Wall Street firms last year. Johnson noted, however, that he anticipates they will fall in 2008. Meanwhile, others say it's still too early to forecast a downturn.
Labels: Bear Stearns, layoffs
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