There's anxiety across New York City, as the financial system convulses.
According to eFinancialCareers.com, there has been a flood of resumes to the email boxes of headhunters. Of course, a big chunk is coming from the employees of Bear Stearns Cos. (NYSE: BSC). In fact, the rumors are that as many as 7,000 employees may get pink slips.
But here are some other recent announcements:
• Citigroup (NYSE: C) plans to layoff 2,000 employees from the trading and investment banking segments. The cuts will also include senior-level people.
• UBS (NYSE: UBS) may slash as many as 8,000 positions.
Actually, so far this year, the job losses for the financial sector have come to about 22,000. And as seen from the recent announcements, it looks like things will continue to get worse.
The pain is fairly widespread. Then again, Wall Street has been in boom-mode since 2003 and there was a significant amount of hiring. For the most part, the community has been in a well-insulated bubble. That is, as the rest of the nation suffers from the economic slowdown, the "masters of the universe" have been able to reap big-time gains. Hey, last year Blackstone Group LP's (NYSE: BX) Stephen Schwarzman got a cash distribution of $350.2 million as well as $684 million from the firm's IPO. Interestingly enough, he said that 2007 was not a "fun" year.
Perhaps Wall Street is, well, tone deaf?
OK, the credit crunch has definitely had a sudden impact on the financial system. As a result, Wall Street firms are scrambling to repair their balance sheets. The upshot is that there will be less firepower to get deals done, such as buyouts, public offerings and mortgage financings.
Basically, if history is any indication, the pain could be quite severe. Just rewind things back to the 1970s and you will find that a downturn can be prolonged and pervasive. What's more, we've seen these kinds of things in other boom-bust industries, such as with tech startups. Yes, in Silicon Valley, it took several years to overcome the dot-com bust.
According to a piece in BusinessWeek, about 23% of NYC's jobs come from the financial sector, as well as 27% of the tax revenues. In other words, the financial meltdown has a good chance of snowballing across the city, such as to restaurants, local merchants, real estate and so on.
True, the lowly US dollar should help as rich foreigners find bargains in NYC real estate. But, is this really enough to offset the severe downturn in the financial services industry?
My gut tells me that it won't. Unfortunately, when it comes to the financial services system lately, it seems that the worst-case scenario isn't far-fetched.
Tom Taulli is the author of various books, including The Complete M&A Handbook
and The Edgar Online Guide to Decoding Financial Statements . He also operates DealProfiles.com.
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Reader Comments (Page 1 of 1)
3-22-2008 @ 2:13PM
prousa217 said...
Yes, many jobs from financial services would be lost. Citigroup, Bear S, lehman B, Goldman S, and many other sectors such as investment banks, financial services.... Why? because we have too many greedy and crooked CEO's running the companies. But still, they walked away with millions wrecking American lives. How does that happen? I was not brought up and educated that way. I see the DJ averages goes up and down daily as if there are bunch of drunken idiots, cluelessly trading stocks just to fulfill their greed. hey trade stocks without any substance how the it goes up or down?? One day oil went up by $3.00 per barrell, they said it was due to a rolling fog hampering offshore drilling.... Do we really look that stupid, guys? Our finances are based on the mercy of your speculations. We pay for the high gas price just 3 days after your idiot anaylogy. Now I see over 22,000 layoffs coming.. and you wonder why? I strongly suggest that all of you go back to school or go see a shrink before you get a new job!! You guys are making me sick.. hey, Feds are not going to help you this time.. you are on your own..mayeb sourcing yourself out of the country??!
3-23-2008 @ 8:41AM
VINCENT BENFANTE said...
IT IS A TERRIBLE DISGRACE TO SEE ALL THESE FINANICAL PEOPLE LOSING THEIR JOBS IN THE BIG APPLE, ALL DO TO THE FACT THAT BEAR STERNS WENT BELLY UP, AND ALSO THE STOCK MARKET BEING A ROLLCOASTER. IT IS A VERY SERIOUS PROBLEM, IT ALLS STEMS FROM OUR GOVERNMENT ALLOWING THIS TO ALL HAPPEN
IT IS GOING TO BE A MUSHROOM EFFECT BECAUSE THIS IS FAR FROM OVER, IT IS ONLY GOING TO GET WORSE WHEN YOU START SEEING OTHER BANKS GETTING WEAK. // case closed //
3-24-2008 @ 7:45AM
sid said...
I'm in the police department in Miami. We are currently doing training exercises and disaster scenarios for when the banks here collapse as well as the problems associated with 1/3 of all homes being vacant. There are also 99,676 homes that will be foreclosed on in the enxt six months and a small scale war is being predicted. Recently, 3 complete battalions were sent to Homestead AFB to get ready for this summer. It will really be bad here this summer, almost like a Mad Max movie was the description by General Buck Ryan of the joint services task force,.