On the day President Barack Obama sent his $447 billion jobs bill to Congress in a bid to solve America's unemployment problem, the Bank of America delivered an economic blow -- announcing plans to slash as many as 30,000 jobs.
The jobs cut is the single largest job reduction of a U.S. company this year, and U.S. unemployment remains at 9.1 percent more than two years after the official end of the Great Recession. Obama is seeking support from Congress for his plan to "put the country back to work."
Bank of America is moving in another direction, however, taking aggressive job-cutting action as the nation's largest bank tries to cut costs as the U.S. economy continues in a slow-growth, high-unemployment mode and its Countrywide mortgage unit continues to suffer massive losses.
The cuts fall in line with massive job reductions at financial companies in the U.S. and abroad, however, as already this year the fifty largest global banks had announced nearly 60,000 job cuts, the fastest pace since the recession-plagued year of 2008. As the economy in the US and Western Europe stagnates, banks have had to reduce costs to become or remain profitable.
Bank of America said the elimination of 30,000 jobs will help the company cut $5 billion annually in expenses by 2014.
"As the company implements the thousands of decisions from Project New BAC over time," BofA said in a statement, "it intends to become a more focused, leaner, and more efficient company, providing all of its customers and clients with the best financial services, generating strong revenues, carefully managing expenses and risks, and delivering long-term value for shareholders."
The company already announced job cuts of 6,000 earlier this year, but the latest move is a significant down-sizing effort for the bank, which employed 288,000 workers as of June 30 of this year. The company's stock has been clobbered this year amid struggles from its mortgage units and concerns over a need the bank needs to raise more capital in the global economic turmoil, shedding 47 percent in 2011.
On Monday, Bank of America's stock traded up 7 cents on the news, to $7.05, on the news. The 52-week low for Bank of America (NYSE: BAC) is $6.01, but the company's stock has plummeted this year, down from a yearly high of $15.31.
The bank's job cuts are part of the first phase of a cost-cutting program -- "Project New BAC" -- the company hopes will ultimately result in the full $5 billion in annual savings. The company issued a statement on the "new BAC" job cuts plan Monday at the Barclays Capital 2011 Global Financial Services Conference in New York.
"It's time to simplify the organization, streamline the organization and make sure our business processes are relevant when you have a smaller, more focused company. We just don't need to be the biggest," Bank of America CEO Brian Moynihan said in a Sept. 6 interview.
Bank of America said its goal is not a "given number" of job cuts, but rather implementation of the New BAC decisions. The company said as those decisions are made, employment levels in certain areas under review are expected to be reduced.
The bank has announced a multiple moves in recent weeks, as the bank tries to reshape as drags with the weight from Countrywide's struggling mortgage business. Bank of America had acquired Countrywide, a troubled mortgage lender, at the time the federal government was involved in TARP bailouts of many financial companies.
Among recent moves by Bank of America in recent weeks was taking a $5 billion investment from legendary investor Warren Buffett, selling half of the company's China Construction Bank investment for $8.3 billion, and ousting consumer bank head Sally Krawcheck.
In a meeting in Yew York on Monday with analysts, Moynihan also didn't close the door on other drastic moves, including a bankruptcy filing for Countrywide, which has cost Bank of America tens of billions in losses. When asked if he would consider putting Countrywide into bankruptcy Moynihan replied, "We look at all our options."