Here is an insane datapoint: Bank of America Corp. is getting rid of more employees in the next few years than most of its largest U.S. competitors have working for them.
Here is an even more insane point: The employees are not the source of financial distress for BAC; their ongoing operations are actually quite profitable. The problems BAC is facing are their legacy operations — the God-awful acquisitions they have made over the decades, culminating in the disastrous buying spree under former CEO Ken Lewis. He made absurd purchases of Merrill Lynch and the even more suicidal buy of Angelo Mozilo’s Countrywide.
These buys reflect how poorly one of the largest banks in America understood, well, just about everything finance related. They obviously misread the housing market (just because you are one of the nation’s biggest mortgage underwriters doesn’t mean you actually know what you are going!) They obviously did not understand changes in the investment management and underwriting business. Clearly, their ability to perform basic due diligence was terrible. Lastly, any hope that they could accurately assess intrinsic value of acquisition targets was also sadly lacking.
In short, BAC should have laid off one person — Ken Lewis, pre-2007-08 buys; their grossly incompetent Board of Yes Men Directors should have been fired then as well.
The chart at the top of the page is yet more evidence of the evils of Bailouts: These taxpayer funded blasphemies against capitalism create huge, unmanageable, anti-competitive banks. How enormo? The 30,000 BAC job layoffs officially announced this week — the biggest single workforce reduction by a U.S.-based company so far this year, according to consulting firm Challenger Gray & Christmas — are larger than the number of employees at most of the firms in the KBW Bank Index (Data courtesy of David Wilson, Bloomberg News).
It is an absurdity. I don’t go quite as far as Chris Whalen does — he calls the headcount profiteering layoffs “criminal” — but its obvious to this observer that the bank bailouts were, and continue to be, a terrible idea.
The next time they eventually collapse (an inevitability) can we please do a prepackaged bankruptcy? Its time to stop rewarding incompetency. . .