What Bank of America's layoffs say about the sector
A pedestrian walks by a Bank of America branch office on January 21, 2011 in San Francisco, Calif.
Steve Chiotakis: There's word today that Bank of America is about to layoff thousands of employees. Reports are the nation's biggest bank by assets is gonna cut 3,500 jobs in the next few months. And its restructuring plan could push those job cuts as high as 10,000.
Let's get some perspective on what this could mean to the banking industry and the economy as a whole. Perry Mehrling is professor of economics at Barnard College. Good morning, professor.
Perry Mehrling: Hello.
Chiotakis: What does a mass layoff at such a big bank -- like the one we're seeing at Bank of America -- really mean? I mean, does it tell a bigger story about the banking industry?
Mehrling: Bank of America has its own specific challenges, but I do think there is a bigger story there. Certainly, the whole economics of banking have been changed. The regulatory changes and the economics of the industry are sort of long term troubles. What's heating the banking industry right now is mainly Europe -- the funding pressures that are coming from the troubles that Europe is having. Amd I'm sure those are affecting Bank of America and all other global banks. That's the thing that I would point to if I was running a big bank, that's what I would be worried about as a game changer.
Chiotakis: What happens if the economy gets worse or we go back into recession? Are the banks ready for that?
Mehrling: Probably not. Almost nobody's ready for that. This is coming as a surprise and a disappointment, and we're going to all have to adjust our expectations. You're seeing those adjustments, of course, in the stock market and elsewhere. In falling bank stocks worldwide.
Chiotakis: Perry Mehrling, professor of economics at Barnard College. Professor, thanks.