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The Specter of Layoffs Is Still Haunting Wall Street It’s Too Late! Even Ben Bernanke Can’t Save Us!

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When a company starts missing earnings estimates, showing same-quarter losses over the previous year, and doesn’t have a clear plan to turn things around, Wall Street firms usually don’t hesitate to tell it that it had better start cutting costs and slashing payrolls soon or face investor’s wrath. Now that turnaround logic may be applied to Wall Street’s banks and brokerages.
When Morgan Stanley revealed this morning that the monster that ate the credit market had chewed a big hole in its earnings, many began to wonder whether the damage all along the Street might be more extensive than previously thought. Lehman Brothers, which was supposed to be on the bottom of the pile (only Bear Stearns was viewed as worse-off), beat estimates. What does it mean when smaller, more credit-focused Lehman can out maneuver the credit crunch but the second-largest securities firm gets stung so badly.
This now has people saying that the current credit crisis is worse than what happened when Russia default on its debt and Long-Term Capital Management collapsed.
So far Wall Street has resisted broad layoffs. Some mortgage origination units have been shuttered but there’s been little news of more far-reaching cuts. There were predictions that cuts would be made as soon as the week after Labor Day. But here we are a few weeks into September, and everyone is still at their desks.
But don’t get too comfortable there. The latest number being thrown around is 10,000 jobs lost on Wall Street. And that’s not even the worst case model.
Oh, and if you’re some kind of struggling artist waiting tables and you wait to be discovered, you probably shouldn’t
smile too much at the news. Much of this city runs on the fuel that Wall Street pumps out. Losses there get multiplied out into the service sector across the city.
“Economists at the city's Independent Budget Office have calculated that for every job lost in the securities industry, there are eventually another four to five jobs lost across the city economy,” the New York Post reports today.
Remember what they used to say: “When France sneezes, Europe catches a cold.” New York City, your France is called Wall Street.
Brace For Big Job Losses On Wall Street and City [New York Post]