Bank Of America To Cut 30,000 Jobs, Trim Expenses
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Just as President Obama is pushing his plan for new jobs, the nation's largest bank delivered this blow: It's cutting 30,000 workers from its payroll. Those cuts are part of Bank of America's latest effort to deal with mounting problems: mortgage losses, lawsuits tied to those bad loans, and a stock price that shed half its value in just 12 months.
From member station WFAE in Charlotte, Julie Rose reports on Bank of America's attempts to cut billions of dollars in expenses.
JULIE ROSE: It's been a slog, a plod, a struggle for Bank of America these last few years, or as CEO Brian Moynihan put it yesterday...
BRIAN MOYNIHAN: The grinding forward of the economy and a grinding forward of consumer spending levels in our businesses.
ROSE: He kept using that word grinding at a financial conference organized by Barclays Capital. Picture Bank of America's 60-story headquarters high rise in downtown Charlotte, slumping against a giant grindstone. Occasionally, the friction sends off a spark, lighting yet another fire to be squelched. Lawsuits related to Bank of America's massive mortgage business are now in the billions.
The pressure has led Moynihan to unload big chunks of the bank - its international credit card business, for example.
MOYNIHAN: We've been selling all our non-core assets that we've accumulated over the years.
ROSE: The hope, at the end of all this grinding, is a sharper, more polished bank.
MOYNIHAN: The whole goal here was to make our company more streamlined, more efficient, easier to do business with, both internally and externally.
ROSE: But he was short on the specifics investors are hungry for. He didn't even talk about job cuts. The 30,000 number came in a press release after Moynihan finished speaking. Bank of America's stock bumped up temporarily last week when Moynihan rearranged his top management. The stock bumped again yesterday when Moynihan said Bank of America will trim $5 billion a year in expenses by 2014.
Investors may also have been slightly relieved at the prospect of 30,000 job cuts, since recent speculation had the figure as high as 45,000.
BERT ELY: A lot of this is basically clean up from the mortgage mess and the problems that it acquired when it bought Countrywide.
ROSE: This is Virginia banking consultant Bert Ely.
ELY: And the big question mark with regard to mortgages is: How much is it finally going to cost?
ROSE: Mortgages are the root of Bank of America's woes. Moynihan frequently flashes a slide at these investor gatherings to prove the point. It's a bar chart with five of the bank's six divisions: credit cards, wealth management, deposits, et cetera above the profit line, and one big bar hanging below it.
MOYNIHAN: As you can see, all the businesses we have make money, except for mortgages.
ROSE: But it's a big exception. The size of the home loan mountain Bank of America sits on - thanks to the 2008 acquisition of Countrywide Financial - dwarfs that of all other banks. Many of the loans are delinquent. Many appear to have been given to people with no chance of paying them back. Investors in these securities are lining up with lawsuits, claiming they were misled.
Moynihan says the bank has set aside enough money, tens of billions of dollars, to handle the problems, but investors seem to want more assurance. Here's a question Moynihan keeps hearing at these investor conferences.
MOYNIHAN: Can you, or would you bankrupt Countrywide? We'd look at all our options, but we wouldn't discuss them in a forum till we made a decision. But we always look at all our options on everything.
ROSE: Bankruptcy protection for Countrywide might let Bank of America walk away from some of the liabilities and uncertainty around the mortgage mess. SNL financial analyst and contributing editor Nancy Buese says it's the not knowing that really hurts right now. As the nation's largest bank, with so much of its business tied up in the floundering housing market, Bank of America's fortunes depend on the strength of the U.S. economy.
Buese says investors are obsessing about Bank of America's cost-cutting and layoff plans because...
NANCY BUESE: All banks, from large to small, are going to have to cut costs over the next few years. The banking industry's got to get smaller. It's just that simple.
ROSE: Banks, on the whole, have too many branches, employees and ATMs for an economy where people aren't spending like they used to, says Buese.
BUESE: So I think that the market is looking at Bank of America as sort of an early warning indicator - if you want to put it that way - of what may be going on in the banking industry, generally.
ROSE: Bank of America is just being forced to talk about it publicly.
For NPR News, I'm Julie Rose, in Charlotte.
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