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Bank of America announces 16,000 layoffs

People walk by a Bank of America branch office on July 18, 2012 in San Anselmo, Calif.

Bank of America is accelerating plans to cut costs by laying off workers. According to the Wall Street Journal, the bank has set a target of cutting 16,000 jobs by the end of this year -- about 6 percent of the bank's workforce.

The company has actually been working on this transformation since the financial crisis, says Dan Fitzpatrick, who wrote the piece for the Journal. "It just takes a long time to turn around a ship as big as BofA," he says.

Before the crisis, the Bank went on an acquisition binge, and it has taken time to figure out what fat to trim.

BofA may have had little choice, according to Chris Low, chief economist at FTN Financial. In traditional banking, he says, "you make money by taking in deposits and making loans. It's the difference between those two where banks earnings live."

But as the Federal Reserve continues to drive down lending rates, margins for such banks are becoming thin.

"The Bank of American decision to lay people off," argues Low, "is a decision to try and improve their profits through the cost side. They can't do it by earning more money, so they're going to do it by saving money on the costs."

For the bank to truly bounce back, it will have to continue to clean up their lending process; then decide where they should focus on growth, says Low. That will probably mean less focus on storefront retail and more focus on investment and non-traditional banking.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.
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We want those 16,000 workers recruited for the rebuild of the white collar criminal agencies across America. The new growth industry will need the laid-off defense industry and financial industry employees to recover what we all know to be the entire $14 trillion in fraud over this past decade.

We want those 16,000 workers recruited for the rebuild of the white collar criminal agencies across America. The new growth industry will need the laid-off defense industry and financial industry employees to recover what we all know to be the entire $14 trillion deficit...... in fraud over this past decade.

Jeremy, how could you let Chris Low get by with that? BOA charges 5.5% on my $340,000 30-yr mortgage, and the LIBOR is 0.22% today! No wonder they don't return my calls to refi it even though my husb and I have a FICO avg of 807 and earn $350,000/yr. BOA realizes a larger margin on our home loans than Kroger earns selling groceries. The report this morning did not explain how it is that this bank cannot earn enough money. Or did it live well beyond its means for so many years, and if so, please point out that we all paid for that too. As a 35-year supporter of NPR and all its offerings, I really expect so, so much more from all of you.

I wonder, did cutting the executive pay ever come into play? Nah. Those greedy bank tellers making $12 an hour, they are the problem!

Exactly. You would think it had been a great year for them, given BOA set aside 7% more compensation--including exec bonuses!--through the first three quarters of 2011 than it did during the first three quarters of 2010.

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