---Harvard Economic Society, October 19, 1929
Posted on 08/23/2007 5:07:26 AM PDT by Hydroshock
Fretting about bonus money is Wall Street's latest fixation, but investment bankers may soon have more pressing worries.
September could bring a wave of layoffs as big banks aim to bounce back from the summer's credit market swoon. Mass firings now could help brokerage firms cut costs and show investors they're taking decisive action to compete better in a tough market.
It also may have dawned on banking honchos that cutting staff will help preserve whatever's left of their dwindling bonus pools.
"I think [bank execs] are thinking, if I cut right now maybe I save some of this bonus," a senior executive at a Wall Street firm tells TheStreet.com.
The layoffs have begun, though so far they have been mostly confined to the investment bank mortgage desks that were so instrumental in this summer's subprime tsunami.
Wall Street's willingness to repackage bad loans into opaque, bondlike instruments has sent investors scampering for the safety of Treasury debt, leading to the collapse of demand for mortgage-backed securities.
This week alone, Lehman Brothers (LEH - Cramer's Take - Stockpickr - Rating) fired 1,200 workers and Bear Stearns (BSC - Cramer's Take - Stockpickr - Rating) laid off some 240. UBS (UBS - Cramer's Take - Stockpickr - Rating) is said to be considering layoffs because of a drop off in trading revenue, though a spokesman says no announcement of job cuts has been made.
But observers expect the mortgage business cutbacks are only the beginning, and that many firms will wield the ax with authority.
(Excerpt) Read more at thestreet.com ...
PING
I see signs all over "Now Hiring!" at restaurants and stores. Yet would I better prefer to see signs that proclaimed "Now Firing!" -- for being fired is opportunity calling, and being hired can be into a salt mine.
Gettin harder and harder to find somebody who don’t hable none of that engles and will work for 6 bux an hour.
WHAT! ME worry??
Where I live is the same now hiring all over restaurants and stores. They are growing increasingly desperate too, even before the illegal alien amnesty issue failed. Running advertisements on the radio, even some on local tv channels. Giving 500$ signing bonuses.. and giving employees 500$ bonuses if they can get a friend to sign up and stay at least a certain length of time.
But they haven’t yet budged on the wages which are still rock bottom. I think its a psychological issue, just like the levitation act houses are pulling in some areas. Manages and business owners haven’t had to give low end workers a raise for 30 years, or an entire generation. Their entire careers. Even as inflation has made the same dollars worth about a fifth.
But at some point the dam will break. My family’s accounting practice we all along were extra generous and even moreso now, we never have problems finding people. But some other firms are getting desperate, yet again not willing to raise the wages big time.
Anyway I’m going to be interested to see once the dam eventually breaks, when companies have to outbid each other. You can see the impetus too, with government workers retiring, and young people getting into the good government jobs. Same thing is happening or going to happen with a lot of contractors. That makes less supply at the retail and restaurant level.
Exactly the business owners have grown used to paying 6$ an hour for an entire generation. Wage increases are unthinkable to many of them.
But the reality is sooner or later in a labor shortage it becomes simply impossible to find quality people without offering more then your competitors.
What? No “Dinosaur Financial Industry” alert?
Anecdotal, for sure, but —
The company I work for (Fortune 500 big-box retail) appears to be quietly shedding people through attrition — in my store, the workforce is somewhat less than two-thirds of what it was when I came on board a year-and-a-half ago....
One data-point does not make a trend, but......
---Harvard Economic Society, October 19, 1929
This is a perfect example of why we shouldn’t have regulation in the financial markets. Let the free market regulate itself. After making bad loans, foreclosing on huge amounts of real estate they cannot unload, and borrowing themselves to keep afloat, the banks are now laying off workings. They need to offshore all these expensive positions to India and China to save money. They should also look at payday loans to help bolster their bottom line. They might also look at branching out into liquor and cigarette stores, that way they would make double the profits in the inner city areas.
But in the second part of my comment I alluded that there is a "firing" overhang. In general managers and owners are overly reluctant to fire people. By having a reluctance to fire a society does itself no favors. It means that people are "trapped" in the the wrong or sub-optimal positions. Not being as fully productive as they might be.
There is significant governmental regulatory interference that causes this overhang. Employers fear -- some despise -- the increase in state unemployment fund fees that results (at least in the states I am familiar with) from terminations. There is an extraordinary excessive burden to the paperwork of replacing an employee with a new one. Then there is the psychological burden of firing.
Yet in some ideal of free-market economics, firing should be welcome -- for the employee because there is no fear of finding a new -- and better -- position or opportunity, and for the employer because of the hope of improving efficiency, and for everybody -- but firing should be win-win-win. Society wins when the number of "salt-mine" jobs are minimal.
In such a happy-to-fire-and-be-fired-thank-you environment people would move quickly to those roles in which they are happy and productive!
Take the argument to the extreme of (a) person doing no work, because the company can't get any for him. Yet no firing him. Versus (b) the same employee being fired, then doing some very productive at his new job.
Its clear that society (b) would have more real work being done. And our wealth is the combined total of the work done.
I would say one problem is many of our social systems. Like the way people purchases houses, or get health insurance are designed for a time when there was lifetime employment with one employer. In this new world of changing jobs and high mobility does it really make sense to buy a home for example if you are very likely to move in 3-4 years? People are also clinging to bad jobs where they aren't using their potential just to keep the health insurance for their family.
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