Among the many canaries in this coal mine, pay attention to the one that just keeled over at Bank of America. The nation’s largest bank said it would eliminate 3,500 jobs in this quarter alone, with the possibility open for far larger cuts ahead. According to Challenger, Gray and Christmas, layoffs in the financial sector this year have already surpassed 2010 (50,473 vs. 50,327). Even before Thursday’s announcement, BofA has reduced its workforce by 18,252 this year.
This may seem small in an institution that last year employed nearly 300,000, but it’s telling. At least some of the too-big-to-fail banks remain sickly after the massive taxpayer-funded rescue of 2008-09. BofA not only has the drag of the continued housing/mortgage mess, including lawsuits. The stock market has done in the profitable gambling, er, trading the bank does (as opposed to, say, lending to productive enterprises to create jobs).
One also wonders about its “counterparty” exposure to essentially insolvent big European banks. BofA is not alone. Not for nothing have there been quiet but urgent meetings between bank chieftains and government officials in recent weeks.
As others have pointed out, it took the banking sector far longer to recover from the Great Depression than it did the general economy. Now, in a hollowed-out America, “financial services” are the economy to the greatest degree in our history. The way that the bailout was handled looks less wise every day. Saving the big banks as is, even making their bad habits more entrenched, has not saved the economy. It’s also clear that our real debt crisis is not the federal budget, but private debt weighing down citizens, big banks, and, oh, those good old “toxic assets” now ticking in the vaults of the Fed.
It’s a great time for President Hoover to be vacationing among the rich in Martha’s Vineyard.
The Week’s Links:
- How austerity is ushering in a global recession || Robert Reich
- Is the SEC covering up Wall Street crimes? || Rolling Stone
- Why “business needs certainty” is destructive || Salon
- The Tea Party’s revolt undermines the private sector || Slate
- A second Great Depression, or worse? || Simon Johnson/NYT Economix
- Household debt still holding back the economy || Washington Post
- Sachs: The failure of globalization || Economist’s View
- Twelve bullet points confirming a double dip is here || ZeroHedge
Today’s Econ Haiku (by popular request):
Out in the Vineyard
While your retirement burns down
Hero or Nero?