Bank of America May Cut 10,000 Jobs To Recoup Costs
Bank of America plans to lay off 3,500 employees by the end of next month, and potentially even more than 10,000 total, according to The Wall Street Journal and The New York Times. It's the latest installment of the 30,000 to 35,000 layoffs the bank announced in 2008, which were to be staggered over three years. At the time, that meant over 10 percent of the bank's employees.
After acquiring mortgage lender Countrywide and investment bank Merrill Lynch earlier in 2008, BoA said it needed to restructure and eliminate duplicate jobs.
But the economy had also soured, and with revenue from mortgages, credit card debt and car loans slashed, and a 64 percent drop in stock value in 2008, BoA needed to cut costs fast.
Already this year, 2,500 BoA employees have lost their jobs. And as other major investment banks shaved their workforces this summer, the industry braced for the North Carolina-based bank to do the same.
"This is kind of like the beginning of a tsunami," Richard Stein, a partner at executive search firm Caldwell Partners, told FINS.com back in July. "You don't get it in one go; it comes in sort of short shockwaves. It started with Goldman, moved to UBS and Credit Suisse. BoA is next."
Shares of BoA have fallen by over half since the beginning of the year.
Much of this is the result of BoA's ill-timed acquisition of Countrywide, which burdened the bank with billions of losses and legal settlements. BoA CEO Brian Moynihan even expressed buyer's remorse last week.
"Obviously there aren't many days when I wake up and think positively about the Countrywide acquisition in 2008," Moynihan said in a conference call with one of the bank's biggest shareholders.
In an internal memo written by Moynihan, he also quoted "the market's expectations" and "new regulatory requirements" as reasons for the restructuring.
"I know it is tough to have to manage through reductions," he wrote, "but we owe it to our customers and our shareholders to remain competitive, efficient and manage our expenses carefully."
It's been a rough month for Moynihan. In July, two law firms filed a class action lawsuit against the bank for failing to pay overtime, and in early August, BoA began paying out a $410 million settlement to customers who were charged overdraft fees. When AIG handed BoA a multibillion dollar lawsuit last week, the bank's shares cracked under the strain.
The financial giant's struggles in the last few years have been a sorry American parable. BoA is the country's largest bank, keeping safe 12.2 percent of all American deposits in 2009, according the Wall Street Journal. On its "heritage" website, the bank boasts that it has "financed and fashioned our economy," and sure enough, BoA's first customers included Paul Revere and John Hancock, and the bank pops up in all our nation's most defining moments, like a very large and corporate Zelig.
It helps that Bank of America has bought, over time, so many of America's banks.
But those giddy days are over for now. BoA has shifted gears since the early 2000s, when it spent $675 million to grow its investment business. Moynihan has said he wants to trim quarterly expenses by $1.5 billion.
The mass layoffs are just another piece of bad news for BoA rank-and-file employees. Even during the heady years before the recession, workers endured the ethical cost of BoA employment, allegedly "encouraged" by the bank to "burden consumers with debt and enroll them in high-fee programs," preying on students, the elderly, and non-English speakers in particular.
In June of last year, BoA workers filed a class action lawsuit against their employer for depriving them of overtime and requiring them to work through unpaid breaks. A mortgage loan officer filed another similar class action lawsuit against the bank in January.
With all these legal fees, it's no wonder BoA is handing out so many thousands of pink slips.
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Claire Gordon has contributed to Slate's DoubleX, the Huffington Post, and the book Prisons: Current Controversies. While an undergraduate at Yale University and a research fellow at Yale graduate school, she spoke on panels at Yale and Cornell, and reported from Cairo, Tokyo, and Berlin.
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