Goldman Sachs' annual layoffs will reportedly be worse than usual, JP Morgan announced that it's cutting 4,000 jobs, and already Morgan Stanley has let go 1,600 employees.
Barclays, Deutsche Bank, UBS ... people are still leaving Wall Street jobs in a line that seems never ending, and anyone that hoped the bleeding would stop in 2013 is sure to be disappointed.
The financial crisis hit five years ago, and while the U.S. has gotten to the point where it's adding jobs at a slow and steady pace, the global financial sector continues to add and shed jobs in fits and starts. According to the New York Office of the Comptroller, New York's securities industry lost 28,300 jobs during the financial crisis, and has only gained back around 8,000.
It's important to understand why.
Wall Street's problem is a business model problem. The changes the industry was forced to undergo due to the financial crisis have done away with the revenue streams that it depended on before. Regulations are tougher and the market is rougher. Think of these years of transition period. Wall Street is figuring out what it will be and how its business will work.
For one thing, proprietary trading — in which a firm trades for its own direct gain — has been banned by the Volcker Rule. This was Washington's reaction to lurid stories of banks creating toxic investment vehicles designed to take money from their clients. What it means for the business, is that firms are not only missing prop trading revenue, but they're also letting go of the traders and support staff that used to execute those trades.
Then there are cash requirements. Both domestic and international regulations require banks to hold more capital in the event of a doomsday scenario. Firms haven't been shy about raising cash to meet these standards, and that means selling off assets and cutting costs like compensation.
Morgan Stanley CEO James Gorman said there were "too many overpaid bankers" anyhow.
Plus, Wall Street is still putting away money for lawsuits stemming from the financial crisis.
"This is going to be an endless beatdown for the banks in terms of legal claims," said famed bank analyst Meredith Whitney last year.
Meanwhile, the parts of Wall Street's business that new rules have left untouched are still struggling to generate the revenue they once did. In terms of stocks, it was only last month that the S&P 500 reached 1500 for the first time since 2007.
Bonds aren't the money-makers they once were either. The Federal Reserve's policy of keeping interest rates low means that yields are lower across the board. As a result, banks are cutting their fixed income teams. In an effort to refocus their business model, UBS got rid of its team all-together, causing a loss of 10,000 jobs.