Wall Street's Insecurity - Cuts in Jobs, More Home-Cooking

Wall Street's Insecurity
Cuts in Jobs, Bonuses Add to Ripple Effect; More Home-Cooking

By IANTHE JEANNE DUGAN
April 12, 2008; Page B1

Derek Thornhill never imagined he would be canceling vacations and cooking dinner at home to save money. In 10 years working at Bank of America Corp., he rose to become one of the company's top equity salesmen.
But in January, Mr. Thornhill was laid off -- the day before he was expecting the annual bonus that typically accounts for 75% of his pay. Instead, he was paid 20 weeks of severance and a bonus that was only 5% of the previous year's. People in his position typically earn roughly $500,000 to more than $750,000, including their bonus.
"I not only lost my job, but I barely got paid for all the work I did last year," bristles Mr. Thornhill, 34 years old, who has had no luck finding a similar job. Dozens of other laid-off workers said they are having the same problem, forcing some to consider lower-paying jobs or new professions.
It is crunch time on Wall Street as the mortgage turmoil and a dearth of deals and credit lead to mounting job losses. Since last summer, securities firms have announced more than 20,000 job cuts, stretching from New York to London to Hong Kong.
While U.S. securities-industry employment is still bigger than a year ago, in New York about 6,000 Wall Street jobs, or 3% of the total, have been lost since July, after adjusting for seasonal variations, according to Mark Zandi, chief economist and co-founder of research firm Moody's Economy.com.
"The job prospects for Wall Street through this time next year are about as bad as for any industry in the country," Mr. Zandi says. "And people who hang on to jobs will suffer through less compensation. The Wall Street job engine won't be going again until sometime in the next decade."
Throughout the U.S., the sputtering economy has claimed more than 85,000 jobs since December. Particularly hard hit are mortgage lenders, construction and manufacturing firms. As more securities jobs disappear, the ripple effect could hurt many other industries.
Among the announced job cuts: Citigroup Inc. will get rid of more than 6,000 jobs, or 10%, in its capital-markets and mergers-and-acquisitions work force. Lehman Brothers Holdings Inc. is laying off 1,425 people, or 5% of its employees. Goldman Sachs Group Inc. went deeper than its annual routine of cutting the weakest 5% of employees.
J.P. Morgan Chase & Co.'s emergency takeover of Bear Stearns Cos. is expected to cost at least half of Bear's 14,000 employees their jobs, though no exact figure has been disclosed by the companies yet.
"I have been stressed that it will happen to me," says Carol Guenther, 38, an executive administrative assistant at Bear Stearns. She doesn't know if her job is in jeopardy, but has been bracing for the worst since colleagues were laid off in July.
Employees who keep their jobs will likely get much smaller bonuses, which typically can range from hundreds of dollars for assistants to millions for top bankers. Last year, bonuses declined only 5% to an average $180,420 per worker, according to New York's comptroller.
Wall Street turns in cycles of booms and busts. Thousands of securities employees were fired after the 1987 stock-market crash. There were mass layoffs after the dot-com bubble burst and the Sept. 11, 2001, terrorist attacks. Since 2003, though, Wall Street added 100,000 jobs as securities-industry profits surged.
In New York, city officials expect to lose $2.6 billion this year in business and real-estate tax collections and $690 million in personal-income-tax collections, partly because of Wall Street's turmoil. The industry represents 5% of jobs in the city, but 23% of income. "We are starting to see big cutbacks in luxury purchases: chartered yachts, expensive cars and the like," says Milton F. Pedraza, chief executive of the Luxury Group, which conducts research in the high-end market.
Some downsized employees are fighting back. John Harris, an attorney at Litowitz, Berger & Grossmann LLP, is representing more than a dozen former Bank of America employees claiming they were offered bonuses of only 5% to 10% of their pay. Mr. Harris has filed several arbitration cases against Bank of America. "These are people who worked more than 70 hours a week," Mr. Harris says. "They never would have worked so hard, had they known" they weren't going to be paid their full bonus.
Bank of America has announced job cuts of about 3,650 employees since October. The bank won't comment on individuals. But Jennifer DiClerico, a Bank of America spokeswoman, says bonuses are based on the company's and the individual's performance. Last year, Bank of America's corporate and investment banking unit posted a profit of $538 million compared with $6.03 billion in 2006.
Milind Parate, a 35-year-old analyst, was laid off from Bank of America, and his brother now is paying the mortgage on the Manhattan apartment Mr. Parate bought a few years ago. "I couldn't imagine this a few years ago," says Mr. Parate, who was promoted to vice president a couple weeks before losing his job. He wouldn't comment on Bank of America.
Despite great references and contacts, Mr. Thornhill has found jobs only at smaller firms. "It has been absolutely excruciating," he says.