| NEW YORK
NEW YORK Morgan Stanley (MS.N) will slash 1,000
jobs, scale back its U.S. home-lending business and shut down a
British mortgage unit as new management takes a hard look at
the continued deterioration in mortgage markets.
The cuts announced on Wednesday affect Morgan Stanley
employees who generate home loans through brokers and other
third parties, as well as bankers who packaged these loans into
bonds. The bank declined to detail cuts for specific areas.
Including the latest moves, Morgan Stanley has laid off
2,900 people in mortgages, wealth management, investment
banking and capital markets since October. That's 6 percent of
Morgan Stanley's 48,256 employees at the end of November.
The latest job losses are part of a series of cutbacks on
Wall Street that indicate investment banks don't expect the
mortgage crisis to end soon.
"For anyone expecting a housing market recovery, you have
to push out your expectations," said Keith Wirtz, president and
chief investment officer at Fifth Third Asset Management in
Cincinnati. "We see 2011 as the earliest when the market will
get back to a good footing."
Morgan Stanley also is closing its British mortgage
origination business, but will continue servicing loans through
its Morgan Stanley Mortgage Servicing Ltd unit. British
mortgage approvals for house purchases in December fell for a
seventh consecutive month to the lowest level since 1999.
Morgan spokesman Mark Lake said many of the people being
cut would be informed on Wednesday. Costs related to these
moves will be immaterial to earnings, he said.
A year after investment banks first revealed that a housing
slump was leading to subprime mortgage losses, the markets for
mortgage-backed securities and CDOs remain effectively frozen.
After ramping up lending capacity to feed the securitization
machine, banks have no place to sell these assets.
Morgan Stanley joins well over 100 mortgage lenders that
have slashed jobs or gone out of business in the last year as
the housing crisis deepened and credit conditions worsened.
Last month Lehman Brothers Holdings Inc LEH.N cut 1,300
mortgage jobs and closed its wholesale lending business, for a
total of 3,750 job cuts since June 2007.
Morgan's latest cuts come about two months after
co-President Zoe Cruz was forced out for her role overseeing a
debt capital markets business that suffered $9.4 billion in
fourth-quarter losses from an errant mortgage trade. A
management shake-up left Michael "Mitch" Petrick in charge of
all securities trading.
Morgan said it would still service mortgages -- sending
bills and collecting payments for loans -- in the United States
through Saxon Mortgage Services. The bank also will make home
loans to brokerage clients through Morgan Stanley Credit Corp,
which will employ about 100 people after the cuts.
Yet Morgan Stanley has essentially reversed course in the
span of two years. After John Mack took over as chief executive
in June 2005, Morgan was one of several banks that expanded
their mortgage businesses.
For years underwriting and trading mortgage securities
helped fuel record profit for leaders like Lehman and Bear
Stearns Cos Inc BSC.N, prompting rivals to play catch-up.
Morgan acquired Advantage Home Loans in December 2005. It
also bought Saxon Capital Inc, a U.S. residential lender and
servicer, for $706 million in December 2006, just as the
mortgage business was going sour.
"I give them credit for recognizing a mistake and moving
on," Fifth Third's Wirtz said. "They recognized there is
nothing here and are pulling back."
(Additional reporting by Jonathan Stempel; Editing by Tim
Dobbyn and Braden Reddall)