The news is out: Wall Street is shrinking with more than 200,000 jobs lost in the global financial-services industry this year, eclipsing 174,000 in 2009, according to a report by Max Abelson of Bloomberg. (That’s a lot of potential real estate buyers and renters). Wall Street rebounded from the financial crisis of 2008 with the help of unprecedented government support, including loans from the U.S, but this is very different and may indicate a structural change in the banking industry: with higher capital requirements, the failure of exotic financial products and diminished proprietary trading, the industry may just be undergoing a significant paradigm shift.
Banks, insurers and asset managers in Western Europe have been hardest hit, announcing about 105,000 lay-offs this year, 66 percent more than the region’s losses in 2008 at the depths of the financial crisis. The 50,000 job cuts in North America this year are more than twice last year’s yet less than a third of the 175,000 in 2008. Will this affect the New York luxury real estate market?
I hear repeatedly a very depressed tone on Wall Street: there is tremendous anger at those angry at Wall Street, a true amazement how the world sees Wall Streeters as the only culprits in the financial meltdown, when obviously there is a lot of blame to go around. A common theme is the anger against new regulation: one has to wonder how effective this regulation will be when John Corzine spoke so eloquently 3 years ago about the need for regulation, and then just a few months later revealed his MF GLOBAL was leveraged at 40 : 1 …..as opposed to Lehman’s 32 : 1……
The culture on Wall Street has been a breeding ground for excessive greed in the past few years: the intense demands on bankers and corporations to produce acute profits and better-than-forecast results EVERY SINGLE quarter is obviously not sustainable. And bankers are not alone in the blame for this greed: all of us who own stocks, including pension funds and those receiving escalating benefits, were used to never-ending stock price escalations, huge profits, etc. It is the perfect example of extremism. And the press thrives on extremism: its always a much more colorful story, right?
Extremism has failed the banking industry. Extremism has failed entitlement programs. Extremism is failing our political system on the left and the right. Extremism in home pricing helped topple the economy. The problem with extremism is that it is not grounded in reality. Extreme appraisals resulted in over-valued real estate and extreme pricing escalations. Extremism on the left and the right killed the super-committee’s ability to formulate a simple plan for debt reduction. Extremism produces news that is sensationalist, not substantial. Extremism of labor unions produces jobs……outside of the USA. Extremism in technology replaces the need for human jobs.
As we watch the year come to a close, what will be interesting to see is whether those fired were fired to maintain the quality of income for those remaining. Is 2011 the year where we all become aware of extremism in all areas of life and decide its not working?