Another day, another round of job cuts. However, this time the retrenched workers belong to the most venerableWall Street bank, Goldman Sachs, that ha has now metamorphosed into a traditional bank with the grant of a banking licence in New York state.
In the latest sign that the year-long financial turmoil is nowhere near the end, Goldman Sachs has decided to shed 10 per cent of its global workforce of 32,569, translating to a whopping 3,200 plus employees who would be let go.
The company confirmed the cuts after the news was leaked before employees had been told. The cuts are an about-face for a company that had insisted last month that headcount would rise by single-digit percentages this year. The latest cuts reduce headcount to the lowest since 2006.
The steep cuts show no bank can escape the fallout of a market downturn well into its second year. The fallout has eroded the value of assets held by banks and, as credit dried up, slowed deal activity.
Goldman had largely avoided the kinds of massive mortgage and credit losses that hobbled its peers with losses reaching tens of billions of dollars. But it cannot sidestep a global slowdown in investment banking activity. Debt underwriting and mergers have virtually ceased and there have been no initial public offerings in 11 weeks.
In fact, the company had surrendered its investment bank status last month in a bid to raise funds - a move which brought it under the supervision of the Federal Reserve and gave it an image of stability. (See: Goldman Sachs, Morgan Stanley surrender investment bank status)
This was a far cry from the non-interventionist regime that the company had supported in the past, but had the desired effect of capital infusion, with Warren Buffett investing $10 billion, with a matching amount expected from the US Treasury under the Bush administration's bailout plan. (See: Warren Buffett invests $5 billion in Goldman Sachs)
These job reductions are only the latest in a series that has plagued Wall Street. Barclays Plc plans to cut at least 3,000 jobs from its payroll in the US, including operations it acquired from Lehman. Merrill Lynch & Co Inc CEO John Thain recently warned that "thousands" of Merrill's 61,000 employees would be laid off as the brokerage is absorbed into Bank of America Corp. Morgan Stanley, which also has been cutting back in many of the same areas, reduced employment by 4 per cent to 46,383 from its peak in November 2007.