Bank of America Considering 40,000 in Job Cuts

Maybe They Don’t Know a Temporary Cut in Payroll Taxes Might Come

[Update:  The Wall Street Journal is now reporting that "only 30,000 jobs will be cut".  Whoopee!]

 

The Bank of America, the Charlotte based gigantic financial institution is in serious trouble.  Several years ago the Bank decided to buy Countrywide,  a mortgage company whose bad mortgages have cost B of A tens of billions and still counting.  The company’s stock is depressed and it recently sold $5 billion in preferred stock to Warren Buffet in an attempt to shore up its capital base.

Now reports are coming out that the bank may eliminate as many as 40,000 positions in its operations.  The Bank has a new plan,

“The planned personnel reductions at the largest U.S. lender by assets are part of an overhaul known as "Project New BAC," after the Charlotte, N.C., bank's ticker symbol. The 51-year-old Mr. Moynihan is trying to bolster profits amid concerns about Bank of America's exposure to the slowing U.S. economy and a slew of mortgage-related losses and lawsuits.”

A reasonable person might wonder how it is that an employer would end up with 40,000 employees it says it didn’t need, but then given the results in the financial sector this last several years, reasonable persons do not seem to have inhabited the denizens of place like Bank of America.  Suggestions from the bank’s management were solicited.

“Last spring, Mr. Moynihan assigned 44 Bank of America executives to begin a review of the consumer side of the bank, as well as legal, marketing and human resources. More than 150,000 "ideas" were examined in the first phase, the company said in a memo distributed to employees last Sunday.”

Although it is not clear how many of the 150,000 suggestions said “fire me, I am not needed, never was, don’t know why I was hired.”

At any rate it would seem that there are lessons here for the President and his economic advisers.  Cutting the payroll tax on employers doesn’t help when a business concludes it needs less, not more employees.

Of course the Bank is not without compassion for its soon to be let go workers, as its CEO said

"I recognize this magnitude of change can be unsettling," Mr. Moynihan said “

No Mr. Moynihan, unsettling is what your stomach is after a bad meal.  The term you are looking for is “devastating”, at least as far as your laid off employees are concerned.