Bear Stearns to axe a further 310 jobs

Bear Sterns, one of the largest investment banks in the world, announced that it is to axe a further 310 mortgage jobs and analysts have warned that investment banks may be making much bigger cuts.

Bear Sterns is the biggest player in the mortgage business on Wall Street and the investment bank suffered the embarrassing breakdown this summer of 2 mortgage-related hedge funds run by its asset management division, furthermore, its earnings fell 61% in the third quarter.

Bear Sterns has already cut 40% of its mortgage workforce since the start of 2007. The job cuts are the result of a fall in mortgage origination and a decline in demand for mortgage-related securities.

An analyst at Punk, Ziegel, said Wall Street banks may ultimately have to reduce at least 10% of their total workforce to reflect falls in revenue from fixed-income businesses.

The job cuts at Bear Sterns follow the announcement that Morgan Stanley laid off 600 mortgage-related workers and Credit Suisse is to cut 170 in its investment banking arm, bringing its total job losses to 320. Furthermore, Lehman Brothers slashed cut 2,500 mortgage-related jobs.

The majority of the job losses thus far at Bear Sterns have come at the banks’ mortgage origination units and have been spread around the US. However, some have arisen from the ranks of highly compensated New York-based bankers and traders so further job cuts are anticipated.

These job losses could have a considerable impact on the New York economy, which relies heavily on Wall Street compensation to support housing and other industries. Wall Street provided nearly $24 billion in bonuses during 2006, making more than $2 billion in tax for the city and state. However, this figure is expected to be down for 2007.

Finally, Bear Sterns is to merge its mortgage origination businesses, Bear Stearns Residential Mortgage and Encore Credit, into one unit called Bear Res. It will be managed by Jeff Walton, head of Bear Stearns Residential Mortgage.

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