Shareholders have been prodding Citigroup (NYSE: C) to slash costs for years. The idea was simple: After a decade of haphazardly patching together its "supermarket bank" structure, Citi's expenses soared faster than revenue -- in some cases, nearly twice as fast.
It only took one of the biggest financial fallouts in history to get the point across, but Citi's starting to see the light. The megabank announced it would slash 53,000 jobs -- on top of October's announcement of 22,000 pink slips -- for a combined 20% reduction from its peak head count. Rumor has it the cuts will take place in the company's investment banking and wealth-management divisions.
To put this cut in perspective, the four-week moving average for initial jobless claims (for the entire economy) is currently around 491,000. So if Citi were to slash all 53,000 jobs at once, it's not unreasonable to imagine that unemployment claims could spike 10% or more, all from just one bank's headache.
Citi's hardly alone. Goldman Sachs (NYSE: GS) recently said it'd slash 10% of its headcount. Morgan Stanley (NYSE: MS) is in line to cut 10% of its staff in certain divisions. JPMorgan Chase (NYSE: JPM) reportedly plans to cut thousands of jobs, too.
The one bank organization still hiring? The FDIC planned on boosting its headcount by 60% earlier this year to clean up the wave of bank failures. As the banking industry continues to sink, don't be surprised if the FDIC needs a few more. Ah … the irony is almost too much to handle.
One more thought: Most Wall Street banks have been loath to cut the kingly salaries and bonuses of their top bankers too much, out of fear they'll jump ship and find higher-paying jobs elsewhere. Most of the time, that's probably true.
But in today's sink-or-swim world of finance, good luck getting that reasoning to fly with shareholders. Let's face it: Hedge fund and investment banking employees know darn well they're lucky to still have a job at all. That's not to say this mess is necessarily all their fault, but come on; no investment bankers will voluntarily quit and start sending out resumes because their bonuses didn't live up to expectations.
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