Bank of America said Thursday it plans to slash up to 35,000 jobs over the next three years as it absorbs Merrill Lynch and contends with the deepening recession.
The Charlotte, N.C.-based bank, which will be the nation's largest financial services firm when the Merrill Lynch (MER, Fortune 500) deal closes in coming weeks, said it will announce a final job reduction plan in early 2009.
The cuts will come from both companies and will affect all lines of business. Bank of America had 247,000 employees, as of Sept. 30, while Merrill Lynch had 60,900 at the end of the third quarter.
While Bank of America had not announced any large-scale job cuts so far this year, Merrill Lynch eliminated about 3,300 employees since the fall of 2007, mainly in its global markets and investment banking division and in support areas.
"The reductions are designed to eliminate redundancies created as a result of the merger with Merrill Lynch and to reflect the current recessionary environment," Bank of America (BAC, Fortune 500) said in a statement.
Bank of America is likely to keep many of Merrill Lynch's financial advisers, who numbered 16,850 at the end of September, said Scott Rothbort, president of Lakeview Asset Management, which owns Merrill Lynch and plans to hold onto its Bank of America shares after the merger. It's one of the main reasons why the bank bought the nation's largest brokerage firm.
"Most of the brokers are going to stay," Rothbort said.
Those in the companies' capital markets divisions - the traders, analysts and sales representatives - won't be as lucky, he predicted.
The announcement comes just a week after shareholders at both companies approved the deal. The merger ends the independence of Merrill, the storied Wall Street investment bank founded in 1914.
The deal valued Merrill at $50 billion when it was announced on Sept. 14, the day before Lehman Brothers declared bankruptcy. Bank of America shares have fallen 46% since then, putting the value on the merger at just under $20 billion.
Since the merger was announced, both Bank of America and Merrill Lynch have received funds under the Treasury's Troubled Asset Relief Program (TARP) established as part of the $700 billion bailout of the financial services industry. Bank of America received $15 billion, while Merrill Lynch got $10 billion.
Responding to criticism that banks haven't used the bailout money to lend, Bank of America is running advertisements detailing their commitment. The bank says in the past three months it has funded more than $50 billion in home loans, financing more than 250,000 homes.
"The tightening mortgage market should not squeeze out qualified homebuyers," the ad reads. "That's why we're putting our capital where our mouth is."
Bank of America joins a growing list of financial services companies slashing staff amid the continuing credit crunch and downturn in consumer spending. Citigroup (C, Fortune 500) said last month it would cut more than 50,000 jobs, while Morgan Stanley (MS, Fortune 500) said it would slash 10% of its institutional securities division and 9% of its money management business. In October, American Express (AXP, Fortune 500) announced it would shed 7,000 jobs and Goldman Sachs (GS, Fortune 500) said it would cut 3,260 positions.
The financial sector overall has lost 142,000 jobs over the past year, according to the Bureau of Labor Statistics.
Friday, December 12, 2008
Wednesday, December 10, 2008
Congress demands answers on bailout
Key lawmakers blasted Treasury Wednesday for its handling of the $700 billion financial rescue plan, saying it lacks appropriate measures to ensure the bailout is working.
At a hearing held by the House Financial Services Committee, committee chairman Barney Frank, D-Mass., accused Treasury of failing to address its obligation to address foreclosures and enforce lending obligations on banks.
"Refusal so far to use money for that purpose [of foreclosures] undermines the intent of the bill," said Frank. "What troubled me was when Treasury was asked by the Government Accountability Office, 'What are you doing to ensure banks are lending,' they appeared to be saying, 'We're not going to try to find that out.' "
The hearing serves as a follow-up to two reports on how Treasury has conducted its bailout program, including the Congressional Oversight Panel's report on the Troubled Asset Relief Program submitted to Congress Wednesday, as well as a Government Accountability Office report delivered to lawmakers last week.
Congressmen on both sides of the aisle used the scathing reports as a launching pad, lambasting Treasury for a general lack of clarity about its strategy as well as a dearth of measures that ensure banks are using the bailout funds for their intended purposes.
Addressing Treasury's bailout point man Neel Kashkari, the committee's ranking member Spencer Bachus, R-Ala., said taxpayers have a right to know how their tax dollars are being used.
"The taxpayer has the right to expect that you use the same standard of care as when you were working for Goldman Sachs and answering to your shareholders and investors," Bachus said. "The detailed explanations we've received from the GAO stand in stark contrast to the lack of information we've received from Treasury or financial institutions that received funds from TARP."
Rep. Maxine Waters, D-Calif., said she has "seen nothing" from Treasury that that gives her confidence in their ability to manage the bailout. Rep. Carolyn Maloney, D-N.Y., called the program "a dismal failure."
In testimony, Rep. Bill Pascrell Jr., D-N.J, said, "TARP funds have been greatly mismanaged to date and they have not been made to help consumers purchase the goods that they need."
The committee is also hearing testimony from Kashkari, Acting Comptroller General Gene Dodaro and two members of a congressional oversight panel: Harvard law professor Elizabeth Warren and Rep. Jeb Hensarling, R-Texas.
The oversight panel report said that the Treasury Department must do more to rescue struggling homeowners and ensure that the money it's using to bail out banks is working, according to a draft report by a congressional oversight panel released Wednesday.
The GAO report said Treasury has yet to address "critical" oversight issues to ensure the plan is working, including the need for more staff, better management, an improved transition effort and facilities to ensure banks are using bailout funds effectively.
On Monday, the Senate confirmed a former federal prosecutor, Neil Barofsky, whose job it will be to ensure that the program is not tainted by corruption.
First batch of funds running dry
With just $15 billion of the first $350 billion of TARP funds left unallocated, some political analysts expect Paulson to ask for the second half of the $700 billion bailout.
But to get the remaining balance, Paulson will have to convince Congress the financial sector needs it -- and that the Treasury will use the funds appropriately. That may be difficult with the increasing criticism the Treasury has faced from lawmakers.
After the Emergency Economic Stabilization Act was signed into law Oct. 3, Paulson immediately received $250 billion with which to work. The next $100 billion came on Oct. 14, when President Bush asked Congress for the next batch of funding.
Thus far, the bulk of the first $350 billion has been allocated for capital investments in banks. Of the $250 billion allocated, the Treasury has sent out more than $161 billion in checks to 52 banks in exchange for preferred shares and a high dividend.
Treasury has also sent $40 billion to American International Group (AIG, Fortune 500) as part of the insurer's $152 billion bailout, allocated $20 billion for an additional capital investment in Citigroup (C, Fortune 500) and set aside $20 billion to backstop losses from a separate Federal Reserve plan to buy up debt backed by consumer loans.
At a hearing held by the House Financial Services Committee, committee chairman Barney Frank, D-Mass., accused Treasury of failing to address its obligation to address foreclosures and enforce lending obligations on banks.
"Refusal so far to use money for that purpose [of foreclosures] undermines the intent of the bill," said Frank. "What troubled me was when Treasury was asked by the Government Accountability Office, 'What are you doing to ensure banks are lending,' they appeared to be saying, 'We're not going to try to find that out.' "
The hearing serves as a follow-up to two reports on how Treasury has conducted its bailout program, including the Congressional Oversight Panel's report on the Troubled Asset Relief Program submitted to Congress Wednesday, as well as a Government Accountability Office report delivered to lawmakers last week.
Congressmen on both sides of the aisle used the scathing reports as a launching pad, lambasting Treasury for a general lack of clarity about its strategy as well as a dearth of measures that ensure banks are using the bailout funds for their intended purposes.
Addressing Treasury's bailout point man Neel Kashkari, the committee's ranking member Spencer Bachus, R-Ala., said taxpayers have a right to know how their tax dollars are being used.
"The taxpayer has the right to expect that you use the same standard of care as when you were working for Goldman Sachs and answering to your shareholders and investors," Bachus said. "The detailed explanations we've received from the GAO stand in stark contrast to the lack of information we've received from Treasury or financial institutions that received funds from TARP."
Rep. Maxine Waters, D-Calif., said she has "seen nothing" from Treasury that that gives her confidence in their ability to manage the bailout. Rep. Carolyn Maloney, D-N.Y., called the program "a dismal failure."
In testimony, Rep. Bill Pascrell Jr., D-N.J, said, "TARP funds have been greatly mismanaged to date and they have not been made to help consumers purchase the goods that they need."
The committee is also hearing testimony from Kashkari, Acting Comptroller General Gene Dodaro and two members of a congressional oversight panel: Harvard law professor Elizabeth Warren and Rep. Jeb Hensarling, R-Texas.
The oversight panel report said that the Treasury Department must do more to rescue struggling homeowners and ensure that the money it's using to bail out banks is working, according to a draft report by a congressional oversight panel released Wednesday.
The GAO report said Treasury has yet to address "critical" oversight issues to ensure the plan is working, including the need for more staff, better management, an improved transition effort and facilities to ensure banks are using bailout funds effectively.
On Monday, the Senate confirmed a former federal prosecutor, Neil Barofsky, whose job it will be to ensure that the program is not tainted by corruption.
First batch of funds running dry
With just $15 billion of the first $350 billion of TARP funds left unallocated, some political analysts expect Paulson to ask for the second half of the $700 billion bailout.
But to get the remaining balance, Paulson will have to convince Congress the financial sector needs it -- and that the Treasury will use the funds appropriately. That may be difficult with the increasing criticism the Treasury has faced from lawmakers.
After the Emergency Economic Stabilization Act was signed into law Oct. 3, Paulson immediately received $250 billion with which to work. The next $100 billion came on Oct. 14, when President Bush asked Congress for the next batch of funding.
Thus far, the bulk of the first $350 billion has been allocated for capital investments in banks. Of the $250 billion allocated, the Treasury has sent out more than $161 billion in checks to 52 banks in exchange for preferred shares and a high dividend.
Treasury has also sent $40 billion to American International Group (AIG, Fortune 500) as part of the insurer's $152 billion bailout, allocated $20 billion for an additional capital investment in Citigroup (C, Fortune 500) and set aside $20 billion to backstop losses from a separate Federal Reserve plan to buy up debt backed by consumer loans.
Friday, December 5, 2008
Stocks slammed on jobs report
Stocks tumbled Friday morning after the government reported the economy lost 533,000 jobs in November - the biggest monthly decline in 34 years.
The Dow Jones industrial average (INDU) lost 200 points or 2.3% over an hour into the session. The Standard & Poor's 500 (SPX) index lost 2.5% and the Nasdaq composite (COMP) lost 2.6%.
Stocks tumbled Thursday after AT&T (T, Fortune 500) and other corporations announced over 20,000 job cuts, adding to worries ahead of the jobs report.
Jobs: Employers cut 533,000 jobs from their payrolls in November, the biggest monthly decline since 1974, and far above the 325,000 cuts that Wall Street economists were expecting.
September and October's job losses were revised up, bringing the 3-month decline to 1.3 million, the largest 3-month job loss total since World War II. So far this year, 1.9 million jobs have been lost, topping the 1.6 million lost in the 2001 recession.
Although the United States has been in a recession since December 2007, the credit crisis has intensified this fall, causing a series of bank failures and government bailouts as the financial markets were thrown into turmoil.
The unemployment rate, generated by a separate survey, rose to 6.7% in November from 6.5% in the previous month. It was short of the 6.8% economists were expecting, but still brought the unemployment rate up to the highest level in 15 years. (Full story)
The report is maybe one of the worst the Bureau of Labor Statistics has ever produced in its 124-year history, BLS Commissioner Keith Hall told lawmakers Friday at a Joint Economic Committee.
Company news: Executives from Detroit's Big Three automakers are back on Capitol Hill Friday, asking a House panel for a massive loan package to rescue their struggling businesses.
Executives from GM (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler testified before the Senate Thursday. The Big Three are seeking $34 billion in aid to rescue their struggling industry, up from an initial request of $25 billion last month.
Separately, GM on Friday said it will lay off about 2,000 workers in the first quarter of next year.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.61% from 2.56% late Thursday. The 10-year yield dipped below 3% last week for the first time since the note was first issued in 1962. Treasury prices and yields move in opposite directions.
The yield on the 3-month Treasury bill slipped to 0.01% from 0.015% Thursday, near the 68-year low of zero hit last month. The short-term bill is seen as the safest place to put cash in the short term. The low yield means investors would rather preserve cash despite little or no interest than risk the stock market.
Lending rates showed little improvement. The 3-month Libor rate held steady at 2.19% unchanged from Thursday, according to Bloomberg. Overnight Libor fell to 0.28% from 0.52% Thursday. Libor is a key bank lending rate.
Other markets: In global trading, European markets tumbled, one day after the European Central Bank, the Bank of England and Sweden's Riksbank all lowered interest rates. Asian markets mostly ended lower although Hong Kong's Hang Seng managed to rise, gaining 2.5%.
The dollar gained versus the euro and fell against the yen.
U.S. light crude oil for January delivery fell 89 cents to $42.78 a barrel on the New York Mercantile Exchange, after ending the previous session at a nearly 4-year low.
COMEX gold for February delivery lost $14.50 to $751 an ounce.
Gasoline continued its fall to nearly four-year lows, with prices down 1.6 cents to a national average of $1.773 a gallon, according to a survey of credit-card swipes released Friday by motorist group AAA. Prices have been sliding for 2-1/2 months and have dropped more than $2 a gallon, or 54%.
The Dow Jones industrial average (INDU) lost 200 points or 2.3% over an hour into the session. The Standard & Poor's 500 (SPX) index lost 2.5% and the Nasdaq composite (COMP) lost 2.6%.
Stocks tumbled Thursday after AT&T (T, Fortune 500) and other corporations announced over 20,000 job cuts, adding to worries ahead of the jobs report.
Jobs: Employers cut 533,000 jobs from their payrolls in November, the biggest monthly decline since 1974, and far above the 325,000 cuts that Wall Street economists were expecting.
September and October's job losses were revised up, bringing the 3-month decline to 1.3 million, the largest 3-month job loss total since World War II. So far this year, 1.9 million jobs have been lost, topping the 1.6 million lost in the 2001 recession.
Although the United States has been in a recession since December 2007, the credit crisis has intensified this fall, causing a series of bank failures and government bailouts as the financial markets were thrown into turmoil.
The unemployment rate, generated by a separate survey, rose to 6.7% in November from 6.5% in the previous month. It was short of the 6.8% economists were expecting, but still brought the unemployment rate up to the highest level in 15 years. (Full story)
The report is maybe one of the worst the Bureau of Labor Statistics has ever produced in its 124-year history, BLS Commissioner Keith Hall told lawmakers Friday at a Joint Economic Committee.
Company news: Executives from Detroit's Big Three automakers are back on Capitol Hill Friday, asking a House panel for a massive loan package to rescue their struggling businesses.
Executives from GM (GM, Fortune 500), Ford Motor (F, Fortune 500) and Chrysler testified before the Senate Thursday. The Big Three are seeking $34 billion in aid to rescue their struggling industry, up from an initial request of $25 billion last month.
Separately, GM on Friday said it will lay off about 2,000 workers in the first quarter of next year.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 2.61% from 2.56% late Thursday. The 10-year yield dipped below 3% last week for the first time since the note was first issued in 1962. Treasury prices and yields move in opposite directions.
The yield on the 3-month Treasury bill slipped to 0.01% from 0.015% Thursday, near the 68-year low of zero hit last month. The short-term bill is seen as the safest place to put cash in the short term. The low yield means investors would rather preserve cash despite little or no interest than risk the stock market.
Lending rates showed little improvement. The 3-month Libor rate held steady at 2.19% unchanged from Thursday, according to Bloomberg. Overnight Libor fell to 0.28% from 0.52% Thursday. Libor is a key bank lending rate.
Other markets: In global trading, European markets tumbled, one day after the European Central Bank, the Bank of England and Sweden's Riksbank all lowered interest rates. Asian markets mostly ended lower although Hong Kong's Hang Seng managed to rise, gaining 2.5%.
The dollar gained versus the euro and fell against the yen.
U.S. light crude oil for January delivery fell 89 cents to $42.78 a barrel on the New York Mercantile Exchange, after ending the previous session at a nearly 4-year low.
COMEX gold for February delivery lost $14.50 to $751 an ounce.
Gasoline continued its fall to nearly four-year lows, with prices down 1.6 cents to a national average of $1.773 a gallon, according to a survey of credit-card swipes released Friday by motorist group AAA. Prices have been sliding for 2-1/2 months and have dropped more than $2 a gallon, or 54%.
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