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Bear Stearns Lays Off 650 In Mortgage Crisis Move

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By JOE BEL BRUNO, The Associated Press

Published: November 29, 2007

NEW YORK - Battered by the subprime mortgage crisis, Bear Stearns Cos. on Wednesday cut 4 percent of its staff in a move that could prelude a final push by investment banks to cull their ranks before bonuses are handed out.

The nation's fifth-biggest investment bank will cut 650 jobs in all departments from its staff of about 15,500. This marks the third wave of layoffs to sweep through Bear Stearns, which as of last month eliminated about 900 positions.
Bear Stearns has been among the hardest hit on Wall Street as investment banks reel from deterioration in the subprime mortgage and leveraged loan markets. U.S. banks and financial service companies are cutting tens of thousands of jobs in an attempt to lower costs and trim underperforming businesses.

The investment bank's decision to cut jobs with the end of the year just weeks away also spreads worry on Wall Street that other firms will do the same.

Year-end bonuses represent a large part of compensation for everyone from support staff to investment bankers, and eliminating those payments could free up a significant amount of money.

"They are cutting overhead and shoring up positions for next year," said Christopher W. Hunt, whose Stamford-based firm Hunt-Scanlon conducts market research for the executive search industry. "Many people have bonuses guaranteed, but many firms would indeed save on all the other bonuses."

He said Wall Street firms that are trying to trim expenses and slim down before beginning a new year often use this tactic. Typically, only back-office staff such as assistants and secretaries, who aren't guaranteed the kind of blockbuster bonuses reaped by investment bankers and traders, get laid off at this time of year.

The round of earnings warnings and layoffs at Wall Street investment banks likely means bonuses will decline this year, or will be paid out using stock instead of cash to retain key employees.

The New York State Comptroller's office said in a report this month that bonuses are likely to shrink 10 percent from the record levels reached a year ago, when they hit $23.9 billion, or more than $136,000 per employee at major U.S. financial institutions.

In a memorandum distributed to employees that was obtained by The Associated Press, Bear Stearns said the latest cuts are part of an ongoing review "to best position Bear Stearns for 2008 and beyond."

Employees affected would get severance, benefits and outplacement services, the memorandum said.

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