Wall Street Braces for Huge Job Losses

On the day that two investment banks bid a historic goodbye to Wall Street, employees at one of the firms were treated to some inescapable irony: Just feet away from the Manhattan headquarters of Merrill Lynch, a luxury car exhibition had set up shop in the New York Financial Center's Winter Garden.

As they headed into work Monday morning, some Merrill employees saw their faces reflected in the windows of Rolls Royces and Jaguars.

"Can you believe it?" one Merrill employee asked. The cars, she said, are now symbols of what Wall Street used to represent: wealth and success.

Between the bankruptcy filing of Lehman Brothers – once the country's fourth-largest brokerage firm – and the announcement that Merrill Lynch, the world's largest brokerage firm, was being sold to Bank of America, Wall Street recruiters this year expect to see tens of thousands of new job losses in the financial sector and cuts in compensation.

"It's going to be devastating," said Karen DelPrete, a managing director of the executive search firm Gilbert Tweed Associates, Inc. "I think it's going to displace a great number of people."

Executive search consultants say that the financial sector has already lost at least 110,000 jobs since the start of the year. Kevin Becker, an associate partner at the executive search firm Lucas Group, said his company is forecasting that at least 60,000 more financial sector jobs will be cut by the end of 2008.

The Lehman bankruptcy and the Merrill deal, he said, "clearly will have a dramatic impact."

But life at the two unwinding investment banks may be less than dramatic, at least for now.

At Merrill Lynch, a number of employees were grateful for the Bank of America deal. Some felt that the Bank of America purchase may help limit the number of layoffs the ailing investment bank might have to endure, a person familiar with the situation at Merrill said.

Merrill employees with investments in their company, he said, were also cheered by the fact that Bank of America had agreed to purchase Merrill at about $29 a share. Last Friday, at one point Merrill shares fell below $17.

Workers Face Economic Stress

"Considering where the stock was on Friday, this was a pretty good deal," he said.

At Lehman, meanwhile, the company's stock price continued to drop precipitously – down to about 19 cents by the close of the New York Stock Exchange on Monday -- and employees there, said Douglas Baird, a bankruptcy law professor at the University of Chicago Law School, have little recourse to save their investments.

It will generally be difficult for shareholders and employees to sue to recover money they lost when Lehman's stock dropped, absent the kind of fraud or malfeasance seen in the collapse of the energy firm Enron, he said.

"It's not like Enron where they were hiding all kinds of transactions. Lehman was perfectly open about what it was doing," he said.

All 26,000 of Lehman's employees are likely to eventually lose their jobs, but at least some workers there seemed to be taking that in stride. One Lehman analyst who declined to be named said that he and those around him were in relatively good spirits. "Hanging around," "chatting" and engaging in "gallows humor" seemed to be the order of the day, he said.

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