Will cutting 30,000 jobs save Bank of America?
The struggling banking giant tries to save $5 billion a year by laying off 10 percent of its staff
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'?"
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
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.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Today's political cartoons - December 22, 2024
Cartoons Sunday's cartoons - the long and short of it, trigger finger, and more
By The Week US Published
-
5 hilariously spirited cartoons about the spirit of Christmas
Cartoons Artists take on excuses, pardons, and more
By The Week US Published
-
Inside the house of Assad
The Explainer Bashar al-Assad and his father, Hafez, ruled Syria for more than half a century but how did one family achieve and maintain power?
By The Week UK Published