The financial and housing crises that spurred the recession were caused by, among other factors, overzealous lending practices of a number of large banks. According to a published report, that sector has been shedding jobs at a blistering pace since the beginning of the year.
The Wall Street Journal reports
that a number of high-profile banks have either cut or intend to shed workers this year. The financial crisis spurred the creation of the Dodd-Frank Act, and policymakers in the U.S. and abroad have endeavored to more actively monitor the way that financial institutions conduct business as they work to prevent such a catastrophic economic contraction from reoccurring.
For example, Goldman Sachs Group, one of the most vaunted businesses in the world, has laid off more than 5 percent of its employees. What's more, Credit Suisse Group recently let go of between 400 to 600 workers, while Barclays has shed 700 jobs since the beginning of the year.
While it's not unfathomable that big banks would lay off such a high number of workers, what's worrying analysts is that those jobs are unlikely to come back - at least for a long time.
Goldman is aggressively hiring in Asia and South America, where the so-called BRIC economies of China, Russia, Brazil and India are still churning. Traditional economic powerhouses like the U.S. and Europe are being slighted for the opportunities those countries present to large banks, according to industry experts.
Moreover, additional layoffs are coming. Bank of America announced
this week that it would settle a massive mortgage lawsuit to the tune of more than $8.5 billion. With such a large write-off on the way, it is highly unlikely that the biggest U.S. bank by assets will be able to maintain its 280,000-strong workforce.
The banking sector has shed many jobs in the past. Following 9/11, for example, many banks cut a large number of jobs, and many banks drastically cut their workforces after the dot-com bubble burst in the late 1990s.
However, after those mass-layoffs, jobs returned. This time around, analysts are wondering whether the lost jobs will ever come back. As noted by the WSJ, it is an ironic twist of fate that Wall Street, whose firms for so long have urged corporations to improve efficiency and cut costs by axing jobs, is now undergoing a similar consolidation. What's now occurring to big banks may represent a similar transition toward more efficient organizations that function with far fewer workers.