After billions of dollars in investor losses related to subprime-backed mortgages and other similar investments, Citigroup’s employees are the ones who will ultimately have to suffer.
The New York-based banking giant is expected to begin a round of massive lay-offs of investment banking employees this week as part of a corporate plan to reduce its workforce by approximately 65,000 individuals.
As reported in the June 23, 2008 edition of the Wall Street Journal, Citigroup is in the same boat as many Wall Street investment banks as it tries to recover from bad investments on subprime-related mortgages that caused more than $16 billion in write downs in the first quarter alone. Citigroup’s write downs and credit losses from the collapse of the subprime mortgage market now total almost $40 billion, with billions of additional write downs anticipated in the second quarter.
With more than 350,000 employees worldwide, and 9,000 former employees as of March 31, 2008 Citigroup will be hit hard. According to the Wall Street Journal article, the forthcoming job cuts are part of Chief Executive Vikram Pandit’s goal to reduce Citigroup’s annual expenses by $15 billion.