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Author Topic: Bear Stearns Announces More Job Cuts  (Read 1964 times)

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The Web Team

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Bear Stearns Announces More Job Cuts
« on: October 04, 2007, 07:08:28 AM »
As the dust begins to settle from the summer’s subprime turmoil and credit crunch, some employees in brokerage houses are finding pink slips in their hands.

On Wednesday, Bear Stearns (nyse: BSC ) announced it would combine its mortgage origination lending businesses, Bear Stearns Residential Mortgage and Encore Credit, into one unit called Bear Stearns Residential Mortgage Corporation. In the process, the brokerage house also announced it would cut 310 jobs.

"Looking ahead, we will soon be expanding our product menu to include Fannie Mae (nyse: FNM - news - people ), Freddie Mac (nyse: FRE - news - people ) and FHA loans," said Tom Marano, global head of mortgages, rates and foreign exchange.

Shares of the New York-based company ended the day down 0.2%, or 29 cents, to $128.28.

The news comes on the same day Switzerland's Credit Suisse (nyse: CS ) announced it was cutting 170 jobs in reaction to “the current market environment.” (See: “More Cuts At Credit Suisse”) Late last month, the company said it would shed 150 employees, mainly from its mortgage-backed securities unit.

Job cuts have almost become expected. UBS (nyse: UBS  ), also based in Switzerland, announced Monday it would cut 1,500 jobs (See: “Subprime Slimes UBS”), while on Tuesday Morgan Stanley (nyse: MS ) unveiled plans to lay off 600 workers and integrate its mortgage businesses into a single unit. Lehman Brothers (nyse: LEH ) last month shuttered its BNC Mortgage subsidiary. It has laid off more than 2,000 employees in mortgages.

Two weeks ago, England’s HSBC (nyse: HBC ) fired approximately 750 employees from its subprime unit (See: “HSBC Closes Shop At U.S. Subprime Unit”).

All of these cuts come in the wake of a difficult summer, when mortgage defaults left some mortgage-backed securities virtually worthless, leading to a credit crisis and a market downturn fueled by widespread uncertainty as to the extent of the damage.

More than 50 lenders have gone out of business so far this year because they were unable to sell their mortgage debt or borrow money.

Bear Stearns, the investment bank most heavily exposed to the home loan market, took a $200 million loss on two hedge funds established to bet on mortgage debt. (See: "Bear Scare") Those funds are now bankrupt and the subject of litigation.

The flight from risky mortgage debt also led to an 88% decline in revenue from Bear Stearns' biggest business -- fixed income -- in the fiscal third quarter. (See: "The Wounded Bear")

The news of Bear Stearns' layoffs comes on the same day two private-sector employment reports found job losses in housing-related sectors. (See: “U.S. Jobs Outlook: Weak, Not Dreadful”)

A report from Challenger, Gray & Christmas said that financial firms have been hit the hardest, as the financial industry has announced 129,927 cuts this year, with 53.6%, or 69,664, from mortgage lending companies.

Bear Stearns has now laid off two-fifths of the employees in its mortgage businesses this year, the company said. The layoffs announced Wednesday represent 2% of the company's workforce.

Leading the new combined origination unit as its CEO will be Jeff Walton, current head of Bear Stearns Residential Mortgage; Shabi Asghar, former head of Encore Credit, has been named president.
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