Bank of America to eliminate 30,000 jobs

Associated Press

NEW YORK

Bank of America is slashing 30,000 jobs as part of an effort to reverse a crisis of confidence among investors. It’s the largest single job reduction by a U.S. company this year.

What CEO Brian Moynihan is trying to do is nothing less than save the nation’s largest bank. Investors have cut the bank’s market value by half this year. The bank is facing huge liabilities over soured mortgage investments and concerns over whether it has enough capital to withstand more financial shocks.

The cuts, which affect Bank of America’s consumer businesses, represent 10 percent of the Charlotte, N.C., bank’s work force. The bank said it hopes the cuts and other measures will result in $5 billion in annual savings by 2014. The bank already has cut 6,000 jobs this year. The bank also said it would look for cost savings at its other businesses in a six-month review that will begin next month.

“It’s as if someone has hit the panic button,” said Bert Ely, president of banking consultant Ely & Co.

Moynihan has been taking other steps to shore up the bank’s standing. Last week, he shook up the bank’s top management ranks and has been selling parts of the company to raise cash. Last month, Warren Buffett’s Berkshire Hathaway Inc. invested $5 billion in the company.

Moynihan has struggled to calm investors ever since he took the top job in January 2010. He is reversing the empire-building strategy of his predecessor, Ken Lewis, who stepped down amid controversy over the purchase of Merrill Lynch during the financial crisis. Lewis also engineered the ill-fated acquisition of Countrywide Financial Corp., then the country’s largest mortgage lender, which has led to heavy financial losses, lawsuits and regulatory probes.

Moynihan now is taking a knife to the company, hoping to shrink it down to a more-manageable size even if it means losing the bragging rights of being the nation’s largest bank. “We don’t have to be the biggest company out there,” said Moynihan.

Bank of America’s stock has lost 48 percent this year, largely because of problems related to poorly written mortgages at Countrywide. Just in the first half of the year, the bank paid out $12.7 billion to settle claims from investors that it sold them securities backed by faulty mortgages.

Some investors and analysts worry that the job cuts will lead to poor customer service and the bank will lose market share to rivals at a time when there are signs that the economy is slowing down.

They also wonder if the job cuts are enough to produce the profits the bank needs to overcome the spiraling costs from its mortgage business.