By Joseph A. Giannone
NEW YORK (Reuters) - As bad as Wall Street's outlook was before October, the ongoing meltdown and political pressure guarantees the prospects for bonuses and job cuts this year have only gotten worse.
With revenue sinking and not expected to recover soon, firms are slashing costs. Oppenheimer & Co analyst Meredith Whitney told Reuters this week she stands by her August prediction that Wall Street banks would cut about 25 to 30 percent of their workforce between January of this year through March next year.
"October volumes in underwriting and trading were jaw-dropping," she said at Reuters Global Finance Summit in New York. "I don't know whether October is a complete anomaly or not, but re-sizings of the business could go to 30 percent."
A global credit crisis well into its second year is generating big losses and eroding profit across the board for banks and securities firms. Banks worldwide have fired more than 150,000 people since the crunch began and there's more pain to come over the next six months, industry executives said.
Joseph Perella, CEO of Perella Weinberg and a longtime top dealmaker, observed firms tend to make rounds of cuts, and keep cutting until business bounces back.
Goldman Sachs Group (GS.N: Quote, Profile, Research, Stock Buzz) two weeks ago fired 3,200 employees, or 10 percent of its global workforce. Morgan Stanley on Wednesday cut 10 percent of institutional securities staff and 9 percent of its money management jobs.
"This is not the last of it," Perella said.
HEAT IS ON
Bonuses also will come down, not only because revenue is plunging, but because the $700 billion U.S. government bailout for financial services companies made Wall Street compensation a political issue during the presidential election. Lawmakers and regulators are turning up the heat.
Perella, who started his boutique investment banking firm in 2006 after more than 30 years at First Boston and Morgan Stanley, told Reuters that the taxpayer rescue has made big payouts indefensible.
"Where's the pain?," Perella said. "The average American citizen that is paying taxes and working their tail off every day can't figure out why they have to pay billions of dollars of bonuses for an industry that is being rescued."
By the same token, Perella said Wall Street cannot just eliminate bonuses. "But I think people need to be sensitive about what has happened in the country," he said.
Former Goldman Sachs chairman John Whitehead, who has spoken out against firms paying eight-figure bonuses to themselves but giving little to charity, on Wednesday said Wall Street executives did not deserve big payouts.
"The main reason that the large firms paid their executives large bonuses was to keep those executives from fleeing," said Whitehead, who spent 38 years at Goldman before retiring in 1984.
"I don't believe there will be the threatened exodus of people at the end of this year and I don't believe that the bonuses will be as high as they were before," Whitehead said. Continued...
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