After Bank of America investors have endured a year of suffering, Bank of America employees will start to feel the company’s troubles. Although the bank already announced significant layoffs this year, hot on the heels of a $5 billion boost from Warren Buffett, an overdraft fee lawsuit settlement, and a settlement for a lawsuit pertaining to mortgage-backed securities, the CEO of BofA, Brian Moynihan, announced the company will shed 30,000 jobs between October 2011 and December 2012.
For now, Bank of America is the largest bank in the United States. This move is a reflection of the financial industry, which, in turn, is a reflection of the stock market, with financial companies being a strong component of indexes. The stock market is a partial reflection of the broader economy.
While not currently in a technical recession, this is just another piece of bad news in addition to the economic woes currently affecting us. Some have a more direct effect than others; high unemployment rates hurt the wallet for many families, while the European debt crisis seems to be somewhat removed from Americans’ daily financial experiences. Layoffs at Bank of America will obviously affect families who rely on BofA salaries and benefits, but it is a signal that economic turmoil may be around for longer than we had hoped.
We may be entering a period where companies want to avoid being “too big to fail.” After deregulation and a regulatory culture that permitted financial institutions to grow without restriction, companies wary of the consequences of being so large in an industry that still bears high levels of systemic risk may find it better in the long run to fly low — the “Careful, Icarus” approach to business growth.
So far this year, here’s the timeline for Bank of America job cuts:
- August 19, 2011: Bank of America announces a total of 6,000 job cuts for the year.
- September 12, 2011: Bank of America announces 30,000 job cuts between October 2011 and December 2012.
I expect more announcements will come as the financial industry continues to struggle to find footing in the post-recession economic environment.
Updated October 9, 2016 and originally published September 12, 2011.