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More Layoffs On The Way?

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Although the recent job cuts in two Bear Stearns mortgage units have sliced through obscure places called Irvine and Scottsdale, rumors have started to circulate on Wall Street that the axe may soon fall closer to home. Some, including Jim Cramer, have predicted that there will be serious bloodletting in areas tied to credit markets and hedge funds.
“I think that many of these firms have as many as 30 percent more people than they need right now in these departments, and all of them will be cashiered by the end of the year. The lists are being drawn up; the HR people notified,” Cramer wrote recently in New York magazine.
Many on Wall Street scoff at the idea that they have anything to worry about but recent history of market downturns suggest otherwise. When the markets suffered in the years following the bursting of the tech bubble, investment banks and brokerages laid off as much as 25% of their work force. In just one day in the winter of 2003—it was February 7th, to be precise—Goldman Sachs announced that it would cut roughly 20% of its 220 options traders.
Last time around the cuts began with the brokers, since it was a downturn in the equities market that began the bloodletting. This time it may start with those parts of the investment banks directly tied to mortgages, leveraged buyouts and hedge funds and spread from there. As the mortgage market contracts, structured finance could also get hit, with both product and sales people losing jobs as the pool of underlying assets dries up. Derivatives traders may also find the axe swinging in their direction.
But enough of this vague speculation. It’s time for specific speculation. Where are the job cuts coming next? A recent item on DealBook doesn’t exactly name Lehman brothers as the most likely candidate. Except that it sort of does. “Bear Stearns is the nation’s 12th-largest home lender, according to Inside Mortgage Finance. The company, the fifth- biggest U.S. securities firm, ranks second after New York-based Lehman Brothers Holdings Inc. among U.S. sellers of mortgage bonds,” DealBook explains.
There’s also been talk of more cuts coming from Citigroup. Despite claims that they are still dancing in the LBO market, the music seems to have stopped. And a few seats are probably going to get pulled away, leaving some left standing. Like musical chairs but with your job.
Anyone care to irresponsibly speculate about who else might pick up the job cutting axe?
As Bear Cuts Jobs, Some Wonder Who’s Next [DealBook]
Bloody and Bloodier [New York Magazine]