Big Bank Layoffs Continue but Executives Seemingly Untouched

Posted on July 5, 2011

Alas, poor big banks. They have to resort to  accelerated layoffs because of decreased revenue since the laws governing credit card fees have changed, market activity is down and the housing has tanked.  This according to Reuters this morning.

The layoffs began last fall with one of the largest players in the demise of the economy kicking off the process. Reasons behind the layoffs are many and some full of speculation not fact.  Here is a run down of some of the reasons for BOA’s retrenchment.  They include:

Bank of America

  • Merger with brokerage house Merrill Lynch According to one insider:

“You want to trim your least productive, weakest players to preserve the bonus pool for everyone else,” said one banker. “We know things haven’t been great in the spring or summer.”[NY Times]

  • Mortgage morass from banks giving mortgages to high risk clients and using devious means to get the mortgages.
  • Credit card fee restructuring/elimination by new laws.

But on the other side of the balance sheet were these measures to offset revenue loss:

  • The investment side of the bank perhaps followed Wall Street sleight of hand management to keep staff yet cut bonuses.

But Wall Street did not necessarily cut the overall pay packages. The dirty little secret is that to make up for the lower bonuses, many firms simply raised the base salaries. The move has been described by some government officials as a “sleight of hand.” [NY Times]

  • Cutting many staffers to part time was another method used to cut staff.
  • Thanks to what Bill Hardekopf, CEO, calls “a perfect storm” for the financial services industry, banks across the country are adding new fees and raising existing fees on a wide range of services. And if you don’t know how to avoid them, you could be in for a rude–and expensive–awakening.
Throughout the layoffs, most executives at the helm during the financial meltdown and recipients of bailout monies remained in office. While some managing directors will be involved in current layoffs, the big fish will not. [Daily Finance]  CEOs are ultimately responsible for what  happens in a company.  But the CEO of BOA and other large banks remain.  Where is the  fairness in this?
Could any of the above by why credit unions and savings banks and small community bank business is booming?
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