Lately layoffs in the banking industry have been getting a lot of attention, and it looks like you can expect even more job losses in the banking industry making headlines in the next year. At least that is the word according to analysts. One of these analysts, a Mr. Dick Bove has released numbers that are telling us to expect around 150,000 layoffs in this sector in the next year.
While that number does sound bad it is not as horrible as it sounds at the first blush. The current number of banking industry layoffs that have happened during the 2011 year are currently estimated to be about 230,000 jobs lost. So, 150,000 would actually be a significantly smaller amount of losses, though this may have to do with the fact that the companies have already shed so much staff that cannot afford to duplicate those kinds of losses for a second year in a row.
Mr. Bove is citing two reasons for the continued layoffs: the continuation of a weak economy and government regulations. Between more regulatory control from the government and interest rates that are in the toilet the banks are getting ready to make more drastic cuts in order to stay solvent in the current situation.
While being interviewed by a reporter for CNBC Mr. Bove had the following to say about the potential affects of the decline of the banking industry, “What no one has figured out as yet is that the big government cannon is harming more than the big banks, evil though they may be,” Bove who is the vice president of equity research at Rockdale Securities stated in a note to the companies clients. “Small banks are hurt far more than the large ones due to the various restrictions on rate and balance sheet size plus government price fixing.”
He then went on to add a political angle to his message. He told customers that the baking problems will carry into the economy on the whole, then went on to claim that certain forces, such as the regulators, the president, the media, the governor of New York and Congress are all aligned against the banking industry. He said the following exactly, “It has not been understood that people who are fired cannot buy products. They cannot pay taxes. They receive government benefits like unemployment checks instead. New York’s governor cannot tax incomes that do not exist.”
While the words ring a little hollow coming out of the mouth of someone who makes their money in the banking industry, there is some validity to the point. On the whole these comments seem to skip over the fact that these same big banks are largely responsible for creating the situation that allowed the economy to go to pot. These are the same banks that overleveraged their assets on exotic debts in hopes of unusually large returns, and created the subprime mortgage collapse by giving mortgages to borrowers who were clearly not going to be able to pay them back. So take it with a grain of salt.