KEY POINTS:
Wall St banks have laid off more than 34,000 employees since the credit crisis began, and staff are bracing themselves for more job cuts to come as business activity slides this year.
The city of New York, meanwhile, is warning that its own finances could be hit if
there is a sharp contraction in the financial services industry that throws more bankers out of work and slashes bonuses for the rest.
Bear Stearns alone could add about 8000 job cuts to the total if its cut-price takeover by JPMorgan Chase goes through - a prospect that shareholders have threatened to try to block with court action.
Investment banks and securities brokers have so far eschewed the once-and-for-all announcements of mass lay-offs that characterised the burst of the dotcom bubble in 2001, the last time there was a finance industry recession. However, a steady drip of smaller restructurings, so far largely concentrated in the credit market operations of the big institutions, are now starting to add up.
An analysis by Bloomberg, the financial data company, put the figure at more than 34,000 in the past nine months. New York City's independent budget office predicted 20,000 more redundancies by the end of next year, not accounting for the collapse of Bear Stearns, which occurred after its forecasts were finalised.
"If the problems affecting the financial and housing sectors worsen, the recession will be deeper, job losses greater, and fiscal pressures on the city will quickly mount," Bloomberg said.
Bear Stearns employs 14,000 people worldwide and some insiders have predicted over half could be let go when JPMorgan assumes full control. Employees own 30 per cent of the company and have seen the value of those holdings all but wiped out by the liquidity crisis that crippled the business and forced it into a fire sale to its rival.
Bear Stearns shares yesterday remained above the level of JPMorgan's all-share bid, which was valued a little above US$10 ($12.43) per share.
Two Michigan fund managers are "weighing whether it is appropriate to seek a temporary restraining order" on the sale of new shares giving JPMorgan a 40 per cent stake in the company and virtually guaranteeing it enough votes to force the deal through, the funds' lawyers said.
The New York budget office predicted that a bumper tax take from Wall St that has put the city's finances into surplus in recent years will have dried up in 2007. Accounting for the write-off on mortgage investments, Wall St profits are estimated to have fallen to US$3.2 billion last year, the worst figure since 1994.
- INDEPENDENT
