Busted: Bankers and The Global Economy

April 10, 2008

Wall Street Expects 35% Job Losses

As if the latest round of job losses hasn’t been bad enough, the U.S. should expect to have record numbers of unemployed from Wall Street investment firms. Wall Street investment banks hit by mortgage losses and writedowns have slashed more than 34,000 jobs in the past nine months.

The leveraged credit market fueled a record boom in private-equity buyouts before investors began shunning high-yield loans and bonds last year. Standard & Poor’s estimated on April 1 that banks still hold about $213 billion of leveraged loans they can’t sell, which are essentially worthless and threaten the very fabric of banking with liquidity issues.

15,000 investment jobs were lost last month, but some analysts expected 150,000. Essentially, the job market has been holding on. Since a sudden collapse hasn’t happened, the expectations of little more impact on the job market has been high. Some analysts are feeling bolder with every day that passes without a major collapse. With the financing of investment banks, the Federal Reserve has put a new floor in the economy.

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