Lehman Brothers Lay Off 1,300

by Stewart Douglas

Story link: Lehman Brothers Lay Off 1,300

Leading US investment bank Lehman Brothers has today announced it is to cut back on over 1,300 jobs in its domestic mortgage divisions as a result of the slowdown in the housing market and the underlying wider economic problems which it has forecast will continue to cause problems through the coming twelve months.

The investment bank has already lost 2,500 staff from its sub-prime lending operation, which was closed following the high profile collapse of the sector during the summer of 2007.  The latest job cuts mark the extent of the significant downturn seen by the housing market in the wake of the credit crunch, and indeed by the investment banking industry as a whole.

The planned closures will affect three offices at a regional level, and will also see the firm incur a charge of $40 million to reflect devaluations on the company balance sheet at the end of what has been a particularly difficult few weeks for the banking industry as a whole.

Investment as an industry has been severely shaken by the fallout from the US sub-prime sector, which has had a knock-on effect on market liquidity and has driven banks and investment houses to cut back on expenditure in order to maintain profitability levels.

Likewise the market for sub-prime linked assets has died, forcing companies to take substantial writedowns to reflect the devaluation of their assets and make net worth adjustments accordingly.

It remains to be seen whether the job cuts at Lehman Brothers will have the desired effect or whether they will continue to underpin the poor performance of the bank and the industry as a whole.