The last round of earnings for Wall St. firms showed that the financial industry was in bad shape and getting worse. That has been followed by news that the brokerage executives who said in May that things were getting better were wrong. Lehman (LEH) could still go out of business or be sold. Merrill Lynch (MER) and Citigroup (C) have said their losses have not ended. Both may have to raise more money.
Late word is that Citigroup and Goldman Sachs (GS) will lay-off about 10% of their investment banking employees. According to the FT, "The Wall Street bank (GS) is now expected to cut up to 10 per cent of staff in the division that handles mergers and acquisition advice and corporate fundraisings."
The head of hedge fund Paulson & Co recently said global write-offs at financial firms would hit $1.3 trillion. Only about one-third of that has been taken so far. If the number is anywhere close to accurate, the lay-offs among these firms could move up by tens of thousand more.
The loss of 100,000 or 200,000 Wall St. jobs may not seem a lot compared to the millions who may be on the street by the end of the present disaster. But, because these poor souls tend to be well-paid, the hit on the tax base could be more like 500,000 to 1 million people being sacked.
The financial firms have done a great deal to hurt that national economic infrastructure. Now, they are going to do what they can to bring down the tax base.
Douglas A. McIntyre
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