Crains: Huge job cuts on Wall Street forecast

NYC - The WTC spurred funding and construction so it was no big deal? That is a completely inaccurate comment. There were entire companies that were destroyed. There was an enormous amount of financial loss and loss of lives. Some people were so afraid they wouldn't come back to work in NYC. The ripple effect throughout the industry was vry damaging, especially when added in to the other situations. Perhaps you don't understand about Anersen, but that put several thousand people right into the job market in the NY metro area in minutes...now multiply that for every major city in every state where they had their offices and then add in every office they had globally. This hurt NYC and the economy tremendously. Enron may have been one company, but they caused the elimination of several thousand more job, loss of $ for their ex-employees pension funds and anyone else that had Enron stock that was now worthless. This was also just one of several companies that disintegrated the same way over the next year.

80sman - It is always interesting to read your statements about real estate in NYC, but don't start believing your own hype about the "players" making $500k. These are the people that are going to be okay. They have their money and will ride out any market changes. It is the people making $100-$400k that are responsible for the overwhelming majority of RE transactions in NYC. It is these people that were hurt the most in 2001 and it is these people that have NOT had their jobs eliminated in NYC at anywhere near the same clip that they did in 2001. You can shoot your mouth off about the RE market all you want, but you know nothing about how the 2001 recession affected NYC employees or how it is affecting them now. You read a piece of data from Crain's or on some random blog and think you are now also an expert of the NYC job market....keep to spouting off about NYC RE you are more accurate and you will appear less foolish. People who propose to know everything about everything rarely know much at all.

Steve and Tech Guy - you both are morons. Another baisc example - Tech guy say you were actually building an application that were to be downloaded on thousands of peoples machines. in the comments of your code you write or

are these not trademark issues?

dumbasses.

You count users in thousands? How quaint. You don't obfuscate code downloaded to clients? How stupid and inefficient. But with only thousands of users, I suppose the bandwidth wasted isn't all that much.

> Perhaps you don't understand about Anersen, but that put several thousand people right into the job
> market in the NY metro area in minutes...

Unlike Bear? Unlike Lehman (soon to be)? Unlike the 75-100k others who were laid off?

The big point you missed is that the business didn't go away. Andersen clients had to hire other firms. A large number of folks involved kept doing the same client work, just elsewhere. Those accounts still had to be serviced. Those companies still needed audits. In the banking case, those jobs go AWAY, they don't just move. The business just isn't there.

You are making and apples to oranges comparison.

> NYC - The WTC spurred funding and construction so it was no big deal?

Who said it was no big deal? Obviously it was horrible tragedy, and there was corporate and property destruction as well, but that damage was for the most part local, and then met with massive goverment funds. Hell, I know quite a few folks who took advantage of very generous housing subsidies, if we're talking specifially about real estate.

As for Enron and "several companies", again, they had few employees here, and Bear and a possible Lehman will blow away those numbers easily. And only then do we start on the banks.

And for all your "oh no, the pensions", consider that probably 1000x that in value is destroyed with all the problematic asset classes. It stinks for a company's worth of employees to lose their pensions, but in this case you are talking about probably 99.999% of American pensions being affected. No small affair.

"Ignoring comment by petrfitz"

dee hee hee - tech guy you never answered what you write. It seems that you are a back office code monkey who is never involved in what the actual business does. you are like Steve you are told to write something that someone else has created.

"It is the people making $100-$400k that are responsible for the overwhelming majority of RE transactions in NYC. It is these people that were hurt the most in 2001 and it is these people that have NOT had their jobs eliminated in NYC at anywhere near the same clip that they did in 2001. "

waverly, why do you think people in that income bracket have not been hit that hard this time around? From what I've seen and read the absolute number of jobs lost in finance should be larger now than in 01, in part because the industry has grown significantly since then.

I demonstrate significantly more business knowledge than you, and your conclusion is I'm a code monkey? Nevermind business sense - now you're demonstrating your lack of common sense.

You really must be kicking yourself for adding engineering to your fantasy. MUCH too easy for real engineers to disprove.

tech_guy, just give up and block him. petrfitz claimed on another thread (besides the thousands of other things he's claimed) that "he" was a co-op sponsor - not a corporation, but him - yet showed not the slightest bit of knowledge about co-op law or financing. His best ever claim was that he had a "chauffeur-driven Prius." I think he meant Lexus, but Prius it was.

I wish they'd just turn the free WiFi off at the Long Island City Starbucks (or start charging for it) but since they won't, "Ignoring comment by petrfitz" will set you free.

"I wish they'd just turn the free WiFi off at the Long Island City Starbucks (or start charging for it)"

still laughing at that one...

NYC - Bear is a terrible situation, but a lot more of thos epeople got absorbed by JP or found other jobs then the Andersen people. I know because in 2001 they were lined up in the hallways begging for jobs and that just hasn't happened in nearly the same way. The people at Bear that didn't get picked up by JP got packages and bonuses. This probably will amount to more than a lot of people at other FS firms will get in January and the people at Andersen got NOTHING when they lost their jobs. Very few of them were actually absorbed into other firms. Other firms did pick up some business and Sarbanes-Oxley generated additional revenue streams, but the new laws that would prevent "double-dipping" from the Big 4 basically diluted any gains from the SOX business. You want apples to apples? bear had 13,000 employees (not 75,000 like you say) and Andersen had 86,000 employees. Which hurt more? Enron had 22,000 employees as well.

Lehman hasn't gone anywhere yet and hopefully they won't. There are certainly other banks and firms that are struggling right now, but that won't necessarily hurt the NYC job market as much as these other situations did. You seem to be unable to separate the financial loss and the job loss. The FS firms here in NYC have been hurt and will likely be hurt some more before we move forward, but the DIRECT job losses here in NYC are not anywhere near as catastrophic as they were in 2001 and 2002. The banks have been able to spread the pain around to other locations or have shut down hiring. In 2001 it was as if the spigot was turned off mid-stream on September 12th. Firms went from aggressively hiring to completely closing off any hiring for a year. This may not be on some spreadsheet somewhere for you to refernce, but it is what happened. The tech people lost their jobs earlier in the year and the FS people got decimated from September 11th on. The forms were still believing they would turn things around on September 10th and still hiring people left and right for the most part.

Sure some people got government subsidies for RE in 2001, but in 2008 the federal government is taking an active hands-on approach to propping firms up like never before. Agree or not with their actions, they are throwing around a lot more cash at companies today than in 2001.

Finally, the regulatroy environment changed after 2001 and it will likely change again in 2009. FS firms will be more risk averse (at least for a bit) and hedge funds will have their worlds altered when they are forced to comply with audits and disclosures that they don't have to now. This will generate new jobs in the FS industry and help in the recovery.

The loss of $ for the banks is terrible, but as long as they are standing they will find a way to make money. They always land on their feet. They are too greedy not to.

This is freaking hilarious from stevejhx:

"Why does anyone believe anything that petrfitz says? He claims to be this real-estate guru and makes all sorts of nonsensical posts about co-op financing. Every time someone says something, he invents a new credit:

a) Co-op sponsor
b) Air-right holder
c) Apartment building owner
d) Media company owner
e) Celine Dion's next-door neighbor in Las Vegas
f) Chauffeur-driven Prius owner
g) 3000 square foot Manhattan condo owner with a view of the Hanging Gardens of Babylon
h) Trophy wife owner: she's a trust-fund baby naturally blonde English Shakespearean actress singer / songwriter / puppeteer / square dancer, mother of his 2.5 perfect children
i) Knower of multitudes of people in Alpine, New Jersey, but can't remember the name of Main Street"

"bear had 13,000 employees (not 75,000 like you say) and Andersen had 86,000 employees. Which hurt more? Enron had 22,000 employees as well."

I think the 75k is probably in reference is to the tally of overall layoffs in FS firms announced to date, not just at Bear. Agree that Andersen and Enron were huge, but Andersen was headquartered in Chicago and Enron in Houston. And Andersen had operations all over the world. Impact on NYC was far, far smaller. Still, I admit you could be right, especially if no other bank goes the way of Bear. Even if a large foreign bank were to take over, say a Lehman, it may have only marginal job loss because the businesses may be largely complementary as opposed to redundant. That would support your argument. As a counterpoint though, I think none of the banks have ever lost this much money in their histories. And many business lines (that ballooned in size over past 5 years) will be impaired for a long time to come. As their declining book values (from write-downs) decline even further, they need to shrink their businesses across the board, not just those in trouble. That would indicate further work force reductions. Only time will tell how this whole thing pans out.

But as the environment pertains to real estate, I'd say there seems to be more uncertainty now (job security, wealth from deferred comp, perception of real estate prices, size of bonus, etc.) than their was in 01. And for the market, that may play a larger role in an average buyer's willingness to buy than the actual number of jobs lost.

More hilarity from stevejhx:

http://www.youtube.com/watch?v=Zf5ExRvDMgU

No petrfitz jokes on them yet - but they're coming.

steve, forgive my ignorance here, but is that youtube video you?

Yup. Also disproves petrfitz's claim that I'm "nothing more than a translator" (who makes 12-14 cents per word!) who "never wrote anything myself."

I wrote that stuff - and have another 90 minutes more. Headed down to Philly for a gig at Rembrandt's tonight.

SpecialK - Andersen's largest office in the US was in NYC, plus they had a offices in Roseland NJ, Stamford CT and Melville NY,which all affected the NY metro jobs situation.

I totally agree with you that billions of dollars in writedowns can't just go away. There will be pain....lots of pain. When I said the situation now was more of a slow-bleed, I meant that the pain has been ongoing for almost a year now and that seems to signal that the end is near (hopefully). I do think there will be more pain to come, though. How much? Hard to tell. My best guess, and that's all it is, would be that firms will finally hit bottom somewhere between december '08 and June '09 and then the jobs market will pick up slightly at that point and significantly about 6 months after the bottom. Firms will need to have at least a couple of profitable quarters before they bring in a lot of new headcount.

"I know because in 2001 they were lined up in the hallways begging for jobs and that just hasn't happened in nearly the same way. "

Not yet...

And Special K put it better than I could... "As a counterpoint though, I think none of the banks have ever lost this much money in their histories. And many business lines (that ballooned in size over past 5 years) will be impaired for a long time to come"

waverly - point taken on andersen. as for the job market, i can only hope your right. while i would love to pick up an apartment at a discount, a horrible job market doesn't really benefit anyone.

steve - good stuff my man, keep it up.

NYC - while I respect your right to disagree, "not yet" is a pretty weak argument. I am trying to give you anecdotal evidence to help you understand why you may not be accurate in your prediction. Replying "not yet" doesn't really bloster your credibility. I am not suggesting there won't be layoffs. I am suggesting, based on actual experience in this field and in this industry, that while this is bad it is not as bad as 2001.

Oh well....agree to disagree.

I worked at Andersen. Is that credibility enough for you?

"none of the banks have ever lost this much money in their histories."

Not quite true - in 1988 BofA and Citi almost went under for different reasons: BofA from bad farm loans in California, Citi from sovereign-debt default. (Walter Wriston's famous catchphrase: "Countries can't go bankrupt.") Then there was SeaFirst and Continental Illinois (now part of BofA), SouthEast Bank (part of Wachovia), and many others during the savings & loan crisis.

As I've said before, many of these write-downs will be write-ups in the future, once a market for MBS's returns, and the actual extent of foreclosures becomes known. The difference with the RTC banks is they had no access to capital.

I think he was talking about investment banks.

Merrill's loss was reported as its largest (and I think even first) in history. I definitely remember similar reports for the other banks. Most lost *years* of profit...

Most investment banks started out as partnerships (Merrill, Goldman, Lehman) so it's not comparable - no one knows. Only recently have they become publicly traded.

That said, there were legions of them that either did go under (Drexel Burnham Lambert) or almost went under (Lehman). Several merchant banks in the UK did, as well.

NYC - if you worked for Andersen when they went under than you should be able to see a clear difference in this market than in 2001. This is a tough market, but nowhere near what 2001 was like and hopefully it will not get there. 2001 was a completely dark time. Firm after firm was clamped down on hiring anybody for any job for over a year. Right now is not good, but nowhere near that. So many .coms and tech companies in NYC wnet under all at once and you already had the street flooded with Y2K consultants. Firms slashed payrolls deeply, quickly and without abandon. There will be more job losses in NYC, but the longer they can delay it they allow natuaral attrition (8%) to trim some of the people without having to let anyone go. There was NONE of this in 2001. It was as if firms came in with a scythe and lopped off huge numbers of employees in one fell swoop.

I don't know any way to communicate that this is not the same right now than by all of the evidence and experience that I have shared. Again, I am not saying no one will lose jobs, just that it is different.

I agree that there was more gloom at the peak in 2001 than right now (today), but, like every dark period, you go through months of denial first... from what I've seen on how these things progress, I think we're actually on a worse trajectory this far in.

I know you think it was "all at once", but it wasn't. I remember months of shakeout. And months of denial. People like to think that there was a button press, but, like in any bad periods, there are folks calling bottoms all the way down. And there were companies hiring the whole time. Just like now, not all, but some.

I'd consider Bear pretty much "one fell swoop". Nice to think that JPM took 'em all, but they laid off half right away, and the remaining number was actually met with layoffs at JPM itself. I believe the net loss was something like 10k of 13k. Thats a huge swoop. I'd also consider cuts of thousands from a bank a pretty big swoop. Hell, citi had a couple rounds, each one bigger than any dotcom I remember. The companies that I remember closing post dot com 1) didn't go instantly, many tried to hang on for dear life, using whatever funding was left over - often millions and 2) were MUCH smaller than any bank...

Ok, so maybe "none of the banks" is incorrect. My point was really to say that the financial services industry (ibanks, universal banks, commercial banks,insurers, etc) have never before seen the aggregate levels of writedowns/losses that we are experiencing now. And those losses lead ultimately to job losses.

> Most investment banks started out as partnerships (Merrill, Goldman, Lehman) so it's not comparable -
> no one knows. Only recently have they become publicly traded.

Goldman was the last holdout of the biggies, and that wasn't even this decade. The others have been public for decades. (you could also throw Lazard in there, but they've never been bulge, and they were actually 3 smaller banks).

Drexel went under due to legal issues, not profit. The government shut them down.

steve, don't feel the need to justify yourself to petr. He's an exposed pathological liar who uses multiple accounts to pretend he has friends. Attack him and his lies, that's fun, but there's no need to defend yourself from him.

nyc, yes, I know that, but my point was that commercial banks have been around for a long time, so there are more data.

tech - I know all about petr, but I grow weary of him. The last straw was when he said that he had translators working for him who didn't have a lot of education.

Really? If there's one thing about a language, you can sure tell when somebody doesn't understand it. We have to be fluent not only in the language, but the subject matter.

Funny, a friend of mine is a retired physician of Mexican descent who spoke Spanish at home growing up, now trying to get an M.A. in Spanish at a so-so college. He's having the damnedest time doing it because, unfortunately, you actually have to have understood what you're reading in order to comment on it.

I had this disparagement from some finance people a while back about an MA in Spanish (even though my BA is in Economics). Tell you what - let's make a deal: you do my degree and I'll do yours: it's a hell of a lot easier to learn math and statistics than it is to learn a language. Look how many people fail.

Which is why I just had enough of him. If he were funny like JuiceMan ("a member of the Obama election team!") or LICComment ("they're building a Duane Reade in Long Island City!") then I wouldn't mind, but he's just far too insulting and over the top.

Of course he's over the top. That's why I attack him - if he was a positive and uplifting liar, I wouldn't care. But his game is to make you defend yourself to him - that gets him off. Instead keep the discussion on his "qualifications", not yours.

Good advice, but I'm going to keep him on "ignored" for some time to come. I'm punishing him by not letting him play with me. :0

"nyc, yes, I know that, but my point was that commercial banks have been around for a long time, so there are more data."

You are assuming there isn't more data on banks, but thats not quite the case. Morgan Stanley loss was the biggest in 72 years.

http://www.nytimes.com/2007/12/20/business/20wall.html?ref=business

Lehman's is "the biggest loss in its 158-year history"

http://www.crainsnewyork.com/apps/pbcs.dll/article?AID=/20080910/FREE/809109997/1048/newsletter11

"Enron may have been one company, but they caused the elimination of several thousand more job, loss of $ for their ex-employees pension funds and anyone else that had Enron stock that was now worthless"

Lets also not forget that several YEARS worth of pay at Bear went down the tubes (as they were paid in stock they couldn't sell, which then became worthless)

And Lehman is now in the same place...

---
In an arrangement that is typical of Wall Street, Lehman employees have gotten much of their pay in stock and stock options in recent years. That figure could range from 10 percent to 60 percent in Lehman stock, according to a person close to the company.

“Over the past decade an increasing amount of the compensation had been given in stock and stock options,” said Robert Willens, a tax expert who worked at Lehman from 1987 to this year. “Employees were paid in restricted stock that took several years to vest. Stock was granted at the current price.”
--

http://www.nytimes.com/2008/09/12/business/12employees.html?_r=1&ref=business&oref=slogin