Banks Killing Jobs?: Poll

Bank of America(BAC) has grabbed headlines lately for a host of reasons, but one of the most attention-grabbing announcements the bank has made of late was a decision to eliminate 30,000 jobs over the next few years.

The bank's struggles and those of the country at large seemed to come together very neatly in that bit of news, and it was not surprising to me to hear it mentioned by at least one of about four Wall Street protesters I spoke to recently outside our offices. None of them seemed to know much about the banking industry, but they were surely aware of the lack of jobs out there and that number got their attention.

Many more layoffs are coming in the banking industry, according to Richard Bove, analyst with Rochdale Securities.

In a report published Thursday, he argued revenues will be curtailed due to "a major change in the secular outlook for the industry," adding that, "the next big news coming out of Wall Street will be layoffs and bonus cuts." Bove cited "conversations with a number of New York based brokerage firms," as his source.

Bove does not see banks as job destroyers, however. Instead, he blames politicians and regulators in New York State.

"The politicians who run the state have been advocating suing the industry and forcing cutbacks in incomes and now they will get their wish. It is likely that when the industry does recover it will not be in New York State but rather in other states and countries that have policies more oriented to assisting the industry's future growth," Bove writes, adding that "the impact is likely to be beyond the brokerage industry. Incomes and wealth will decline. This is likely to impact housing prices and the sale of a wide range of products. It is expected to hit the state's tax base."

Sherry Jarrell, professor of finance and economics at Wake Forest University Schools of Business, argues the cuts are necessary so that struggling banks like Bank of America can avoid the fate of Kodak(EK), which is fighting to stave off a bankruptcy filing.

"I believe the Bank of America's strategic moves today are designed to prevent what Kodak is going through now, teetering on collapse and a complete redeployment of its assets to higher valued uses. Kodak responded slowly to the shift in demand away from 35 mm film. Bank of America is in the process of trying to pre-empt a loss in market share, by shifting away from businesses that look less promising to focus on more profitable lines of business. The natural evolution of business is to create value, encourage competition, and enable the movement of ideas and labor to their highest valued use. If Bank of America did not take these steps, it could end up like Kodak," Jarrell wrote via email.

Whether cutting jobs now is the right or wrong thing for the labor market in the long run, critics of the banks have pointed to their lack of lending to small businesses as a signal that the banks are not creating jobs they way they might. An analysis of Treasury Department data by The Wall Street Journal found that over half of $4 billion doled out to banks by the Treasury to spur small business lending was instead used to pay back TARP.

Meanwhile, banks have been lobbying against legislation that would increase small business lending by credit unions, according to Ryan Donovan, a lobbyist with Credit Union National Association (CUNA). The trade group argues the Small Business Enhancement Act, which would lift caps on the amount of business lending permitted by credit unions, would create 140,000 new jobs.

What do you think? Are banks job creators or job killers?

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