Citigroup Inc., Lehman Brothers Holdings Inc and Morgan Stanley are among firms that have disclosed headcount reductions so far. After the Internet bubble burst, 39,800 jobs were eliminated during the same period; the number climbed to 90,000 in next two years, according to Securities Industry & Financial Markets Association.
The collapse of subprime mortgage market last year and the ensuing credit contraction have saddled the world’s largest financial institutions with at least $200 billion of writedowns and losses. Bear Stearns Cos., once the fifth-biggest US securities firm, became the emblem of panic on Wall Street two weeks ago, when it was forced to submit to an emergency takeover backed by the Federal Reserve as clients and lenders deserted the company. More bank losses are likely, according to analysts.
Securities firms started eliminating positions in mortgage departments as early as last July, when rising delinquencies on home loans to borrowers with poor credit histories led to a decline in prices of bonds tied to the loans. Between July and December, almost 17,000 jobs were lost, according to data compiled by Bloomberg.
This year, banks including Lehman, Citigroup and Morgan Stanley have been winnowing out employees in fixed income trading, securitisation, asset management and investment banking. Administrative and technology staff have also been let go. So far, Citigroup has eliminated 1.7 per cent of its workforce, while Lehman has chopped 18 per cent. Morgan Stanley has cut 6.2 per cent, and Merrill has eliminated 4.5 per cent.
While JPMorgan hasn’t said how many Bear Stearns employees may lose their jobs, half of 14,000 people at the company may be let go, it is estimated. The two firms have overlapping businesses and JPMorgan, the third-largest US bank by assets, may shut down some Bear Stearns units, an analyst said.