The media is reporting that Goldman Sachs (GS) will cut 10% of its workforce, or about 3,000 people. Since the firm has been at the summit of its industry for decades, the move says a great deal about what is coming in the financial world.

Goldman has been the market leader in M&A, underwriting,and proprietary trading for some time. If the firm was simply looking back at its relatively poor earnings, it would not be cutting now. The management at Goldman is too smart. It would have taken people out a year ago.

The cuts at the financial firm are about the future. Goldman must be looking at the next year and seeing a potential compounding of its losses and no recovery in its core businesses. All those poor souls would not be going if the trouble was only likely to last another quarter or two.

The Goldman news may be bad for Goldman, but it is likely to be much worse for the firm’s less successful peers. A 10% cut in people at Goldman translates to a 15% or 20% layoff round at banks which are still losing billions of dollars a quarter.

Goldman should be the one company that has a chance of making it through the credit crisis without a lot of bleeding. Its actions say otherwise.

Douglas A. McIntyre

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