Fresh reports today that the ranks of Goldman Sach’s “partners” slimmed down by 31 people over the last nine months are yet another sign that the world of American finance is ever-so-slowly returning to its boring roots. Goldman had 483 partners at the end of 2011. That number is down to 407 in its latest filing, a decline of 16%.... The decline in partnerships underscores how Goldman and other investment banks have been shrinking worldwide as a result of tougher market conditions and regulations. UBS just unveiled plans to axe roughly one-sixth of its workforce and essentially wind down its bond-trading operation. In London’s financial center—the City—employment is expected to drop 100,000 from its peak of 354,000 back in 2007, by the end of this year. On Wall Street, official estimates suggest New York lost roughly 20,000 securities industries jobs since 2007. Now, it’s important to highlight the fact that there are differences between different kinds of bankers. Wall Street investment bankers buy and sell companies, help corporations raise money by selling bonds and act as a sales force of sorts for financial institutions that want to flog more complex products such as “derivatives.” On “main street,” bankers are people who take money from depositors and then lend it out to—hopefully credit-worthy—consumers and companies. (see link here)
Note how market conditions coupled with regulation are credited with the changes. I'd call that capitalism at work.
“The decline in partnerships underscores how Goldman and other investment banks have been shrinking worldwide as a result of tougher market conditions and regulations.” To me this statement and all the cutbacks being made on Wall Street are no surprise. Theses were the hopeful results of the Dodd Frank Act passed in 2010. The act was meant to slow down Wall Street and this is exactly what it has done.
ReplyDeleteAside from the regulations, the slowdown is also due to slow economic times. After the financial crisis, not only did our economy slow down, but people are less inclined to trust Wall Street. The post mentions there was high financial related employment in 2007. The reason why the crisis happened was because it was too high. Banks were too big, and finance was too hot of an industry. Now that Wall Street has simmered down, the government can regulate better.