Bank of America, the nation's largest lender, announced on Monday that it will cut 30,000 jobs — 10 percent of its workforce — over the next few years. The layoffs should save the company $5 billion annually by 2014, as the massive bank trims its consumer, small-business, credit card, and other operations to focus on international and corporate lending. The news boosted Bank of America's battered stock, but BofA is still facing billions in damages from its purchase of Countrywide Financial and all its toxic loans. Will the job cuts put Bank of America back on track?
This is a necessary first step: This "is a fairly significant downsizing," says Bert Ely at PBS. But it will take a lot more than this to fix things. Bank of America has the same problems as the rest of the industry — declining revenue and bloated expenses. The big difference is that compared to other banks, BofA has "those problems in spades." Bank of America can survive, but "it's going to be a long, hard slog."
"Amid major job cuts, is Bank of America 'too big to manage'?"
Bank of America should fix its legal problems first: This streamlining "may be for naught," says William Alden at The Huffington Post. Bank of America is facing massive lawsuits — insurer AIG alone is demanding $10 billion for losses on mortgage-based securities — and the savings from job cuts could be erased by a single defeat in court.
"Bank Of America job cuts fail to address looming legal costs, experts say"
This won't solve the real problem — excessive government regulation: It's a no-brainer that Bank of America, and every other bank, "needed to shrink after the bubble years of easy money," says The Wall Street Journal in an editorial. But the thing that made such a massive layoff necessary was punishing overregulation. Last year's Dodd-Frank financial law, for example, limited the "swipe fees" banks can charge merchants when customers use debit cards. That cut into banks' profits, and now 30,000 workers are paying the price.
"The Dodd-Frank layoffs"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- What would a U.S.-Russia war look like?
- Fall movie guide: All the films you should see in September
- Scottish independence is another financial crisis waiting to happen
- 11 scientific studies that will restore your faith in humanity
- 10 things you need to know today: September 1, 2014
- Why the West should let Russia have eastern Ukraine
- 7 things the world's happiest people do every day
- These real-life Rosie the Riveters changed the face of labor
- The 10 best networking tips for people who hate networking
- 5 deliciously creative oats recipes
Subscribe to the Week