April 11, 2007

FLASH: Here come the bank layoffs - Citigroup axes 17,000

That's 17,000 more likely homedebtors who had the rug pulled out from under them. As we all know, layoffs only speed up the crash, and Citigroup is the #10 subprime lender. Batten down the hatches, the clouds are forming...


In the end, big companies suck. No job is safe. And Desperate Homedebtors with insecure jobs and massive ARM loans are probably thinking one thing right now during these unsettling times:

"Boy, I wish I had sold and rented."

Citigroup Inc., the nation's largest financial institution, said Wednesday it will eliminate about 17,000 jobs as part of a companywide restructuring to reduce costs and improve profit.

37 comments:

Anonymous said...

Sweet jebus that is a lot of people.

Chris said...

On the sold vs rent calculation, we have this article from the N.Y. Times today:

"A Word of Advice During the Housing Slump: Rent"

http://tinyurl.com/yrmvfk

An excerpt:

A promotional spot for the National Association of Realtors came on the radio the other day. The spot, introduced as something called “Newsmakers,” was supposed to sound like a news report, with the association’s president offering real estate advice.

“This is the best time to buy,” Pat Vredevoogd Combs, the president, said cheerfully. “There’s a lot of inventory in the marketplace. Interest rates are low. It’s a wonderful tax deduction.”

By the Realtors’ way of thinking, it’s always a good time to buy. Homeownership, they argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time.

That’s how it has worked out for much of the last 15 years. But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.


Critical of REIC:

“House prices have to fall more before housing becomes a clear buy again,” says Mark Zandi, chief economist of Moody’s Economy.com, a research company that helped conduct the analysis. “These markets aren’t as overvalued as they were a year ago or two years ago, but they’re still unfriendly. And that’s one of the reasons the market is still soft — people realize it’s not a bargain.”

There is obviously no way to know what home prices will do in the next few years. But there are two big reasons to doubt the real estate boosters who insist that it’s once again a great time to buy.

The first is history. After the last big run-up in house prices, in the 1980s, a long slump followed. In the New York area, prices peaked in early 1989 and then fell 9 percent over the next three years, according to government data. (Adjusted for inflation, the drop was much bigger.) Not until 1998 did prices pass their earlier peak.

Keep in mind that the 2000-5 boom was even bigger than the ’80s boom and that house prices on the coasts, according to the official numbers at least, have fallen only slightly so far. So it is hard to imagine that prices will rise 5 percent a year, or another 28 percent in all, over the next five years.

The second reason for skepticism is that buying has never been quite as beneficial as Realtors — and mortgage brokers, home builders and everybody else who makes money off home purchases — have made it out to be. Buyers have to pay property taxes on top of their mortgage, while renters have the taxes included in their monthly rent bill. Buyers also face thousands of dollars in closing costs (and, in Manhattan, co-op charges). Renters, meanwhile, can invest what they would have spent on closing costs and a down payment in the stock market, which hasn’t exactly delivered a bad return over the last 20 years.

And that famous mortgage-interest tax deduction? Yes, it reduces the borrowing costs that come with a mortgage, but it doesn’t eliminate them. Renters don’t face any such borrowing costs.

Almost two years ago, I interviewed a thoughtful 37-year-old man named Tchaka Owen, who happens to be a real estate agent. (Whatever the sins of the Realtors’ association, there are a lot of smart, helpful agents out there. Just remember that they have a financial interest in getting you to buy a house.)

Mr. Owen and his girlfriend, Polly Thompson, had recently moved from the Washington suburbs to the Miami area and decided to rent a two-bedroom apartment with spectacular bay views. “You can get so much more for your money, renting instead of buying,” he said at the time.

Sure enough, house prices soon began to fall in South Florida, and Mr. Owen and Ms. Thompson started to think about buying a place. A three-bedroom Mediterranean-style house that they liked was originally listed for $620,000 last year, but the price was later cut to $543,000. They bought it in June for $516,000. Since then, the market has fallen further, but Mr. Owen said he didn’t mind, because they plan to stay in the house at least a decade. “We love it,” he told me.

Clearly, there are benefits to owning a house beyond the financial, like the comfort of knowing you can stay as long as you want or can fix the roof without permission. But real estate has been sold as more than a good way to spend money. It has been sold as a can’t-miss investment. Back in 2005, near the peak of the market, the chief economist of the Realtors’ association, David Lereah, published a book called “Are You Missing the Real Estate Boom?” The can’t-miss argument was wrong then, and it may still be wrong today.

After hearing that radio spot, I called Ms. Combs and asked her whether she thought there was any chance that she and her fellow Realtors had gone a bit too far in promoting the boom. “I absolutely disagree,” she said, still cheerful. “We help people look at the marketplace.”

So I asked what advice she gave her own clients in Grand Rapids, Mich., where she is an agent. “We often tell people that they need to stay in a house five to six years for it to make sense,” she said.

That’s a nuance that didn’t make it into her “Newsmakers” interview. In Grand Rapids, where the median home costs $130,000, it is probably good advice. In a lot of other places, it may still be too optimistic.

onemorebeer said...

Good start. At least those bloodsucking lawyers at the bottom of ocean will have company now. Serve them right, sir!

Anonymous said...

No it isn't a lot of people. It's 5% of the Citi's employees. And 10,000 of those are not layoffs, just outsourced. Don't confuse the two.

Anonymous said...

bow to the corporate overlords.

DM1976 said...

"Boy, I wish I had sold and rented."

No, 'cause in most states it's easier to get evicted then foreclosed on... Through in a couple bankruptcies and play all the stall cards and you could live for free for 2 or 3 years even with the new bankruptcy laws. You're results will vary depending on the state you're in, how bad your lender wants to get paid vs. how good your BK lawyer is and how bad you want to screw your credit...

DM1976 said...

Anon 12:35 said "Sweet jebus that is a lot of people."

Actually it's only 5%... And actually the Wall St. guys are pretty un-impressed so the stock went down; which is what they wanted to avoid, that's why they're laying off....

Anonymous said...

Thats going to leave a mark on the economy....oouucchh!

Add Automakers, building, ect pretty soon your talking some real numbers

Arioch said...

That's 17,000 more likely homedebtors who had the rug pulled out from under them.

Certainly schadenfreude is delicious in these times. However, remember that a good portion of that 17,000 are not suicide loan, or refi junkies. Many are folks who rent.

The fallout from this hits across the board. I personally gain no pleasure from seeing bystanders and non-participants in the bubble get the fallout.

Remember, when the zero down NINJA buyer walks away, they are not going to pay their 200 to 500k back. So who gets the shaft in these events?

In reality, you find that pension funds (for regular folks) which bought the "investments" (if that is what they call it, however toxic), 401K's etc...

That is all of us, you, me, your parents, your friends. We are the ones who get hit thrice, once with the bubble running up prices, once when many of us are layed off and thirdly when our 401k or retirement fund tanks.

I think the schadenfreude should be a little more focused, however the "homedebtor" target who deerves it the most will walk away leaving the rest of us holding the bag.

You post minimalizes the value and efforts of the portion of that 17,000 who are not participants of the stupidity. Are they merely "collateral damage", "acceptable lossses"?

What is it called when it happens to us personally?

All of these fields are optional. said...

Kieth:

I am tired of your sensationalism-

Citibank is not cutting 17,000 jobs- 9,500 of them are just being shifted to "lower cost locations."

Please get your facts straight.

By the way, I was being sarcastic

bitterrenter4life said...

Kieth, Keep up the sensational work. This blog is so entertaining, and occasionally educational.
I consider you TCDL of the bubble bloggers. You are my Rush Limbaugh, Al Franken, and Wolf Blitzer all rolled into one.
And I agree with you, 17000 jobs being moved, lost or whatever is going to help add to the pain as the unwinding spins up.

Anonymous said...

As usual AL-QWEEFER the drama queen is at it again. 17,000!!! OMG the end of the world is here!!! Soup lines will be forming.

In reality 17,000 people losing their job is nothing.

Every week about 350,000 people file for new unemployment benefits. So in a 5 day week 70,000 people lose their jobs every day. That's a rate of 8,750 an hour during an 8 hour workday.

It's 12:15 so already 25K people lost their job today. And holy shit what do you know, they world just went on about its business.

anonymous wimp said...

All of this is so predictable.

But the media keeps reporting all of these "unexpected" data and reports. At what point do we experience the paradigm shift to crappy results that are "expected"?

When the bad news is the news that is "expected", and the good news is the "unexpected"......THAT is the time to buy. Buy what? Pretty much anything.

Anonymous said...

"And 10,000 of those are not layoffs, just outsourced. Don't confuse the two"

Ha! Yeah, OURSOURCED to cheap labor in INDIA!
Try getting your head out of your ass for once.

foreclose_me said...

As I read the story, the 9,500 outsourced jobs are ON TOP of the 17,000 fired. Total body count: 26,500.

Frank said...

Nah, the layoff victims are happy that they "bought" because they can drag out the foreclosure for six months without making any payments.

If they were renting they'd be evicted in a matter of days.

Anonymous said...

Wasn't the world supposed to end when GM laid off 13,000 in November (or was it December?). And gee wiz here we are 5 months later and the sun still rises every morning.

Behemoths like Citigroup, GM, IBM etc always lay off thusands of people at a time. They did this 10 years ago and 20 years ago and 30 years ago. Nothing new here.

Anonymous said...

count 17,000 or more (second homes investment property) foreclosures

pete said...

Every week about 350,000 people file for new unemployment benefits. So in a 5 day week 70,000 people lose their jobs every day. That's a rate of 8,750 an hour during an 8 hour workday.

------------------------------------------
OH MY GOD!!!!!!!!!! YOUR KIDDING ME!!!!!!!!

Anonymous said...

Certainly schadenfreude is delicious in these times. However, remember that a good portion of that 17,000 are not suicide loan, or refi junkies. Many are folks who rent.


Not so. All those guys saw the easy money in the bubble and jumped after it.

Anonymous said...

Remember, when the zero down NINJA buyer walks away, they are not going to pay their 200 to 500k back. So who gets the shaft in these events?


The Middle Class will get the shaft. The G will bail out their country club buddies and the po' Black Folkz that were "victimized" once again...

Kenduffelsniffenspotzen said...

foreclose_me said...

"As I read the story, the 9,500 outsourced jobs are ON TOP of the 17,000 fired. Total body count: 26,500."

Thats the number I got too. I guess those 9,500 moving to "lower cost areas" must mean India.

Anonymous said...

Did we realy loan 350,000 to somebody to buy a house we sold for 35,000 six years earlier, in a declining wage environment????????

Anonymous said...

yes but we insured repayment from the government!!!! so then there was no inflation during those six years!!!!!

Thor said...

I just saw this article... it's pretty dissapointing:

http://money.cnn.com/2007/04/10/real_estate/alta_alive.moneymag/index.htm?cnn=yes

It tells how it's business as usual with lenders making irresponsible loans. Who do we have to convince that regulation is needed? Not just suggestions from the feds, but regulations with real teeth?

Anonymous said...

You all missed the greater point. Corporate America like CitiGroup now considers parts of America as cheap as a third world hell hole. Buffalo is now on par with Shanghai and Manila.

Just more proof Globalists won't be happy until Americans are sent into 3rd world poverty levels.

You wanted Globalism?! Here it is?! And your homes will be priced accordingly. Detroit and Buffalo just the starting points.

Have a nice day.



"More than 9,500 jobs will be moved to lower-cost locations, both domestically and internationally, with about two-thirds through attrition," the announcement said.

Druskin noted that Citigroup operates in more than 100 countries and that the majority of its workers already are overseas. But he emphasized that the move to reduce costs won't mean wholesale transfers abroad.

"We already have lots of jobs in India -- but also in Shanghai, Manila and Buffalo, N.Y.," he said. "We're looking for the right location."

Anonymous said...

USA is finished!

Anonymous said...

The Middle Eastern Mullahs who own big stakes in Citi told the CEO to start getting the stock price up or else. He's missed on everything else, so it's time to axe staff.

But hard to believe this could be done. Service in Citi is the worst hands down. Wait and wait and wait and wait... they most lose a lot of accounts from people who are fed up.

chris g said...

This really isn't a big deal, and that's why the stock went down today. Most analysts think they will simply achieve the 17,000 through regular attrition, i.e. employees leaving voluntarily to pursue other jobs.

Conservative Independent said...

Citi is half owned by that POS Saudi billionaire that finances islamic terrorist groups around the world.

I hope citi goes bankrupt.

Anonymous said...

cool, less people working in the credit card department......i like it.....when they want to come play over this big debt i have with them, they will be shorthanded. i love it......cut some more big cheese.....

yeah yeah uh huh said...

They have to bail out the blacks and Hispanics this time. Screw all the whites and Asians. Just ask Chuck Schumer, who did a study and decided that blacks and Hispanics should be bailed out, but not whites and Asians. I'm so glad the Democrats are the party of equality and all that crap.

Anonymous said...

pete,

No I am not kidding you. Those are the numbers. 350,000 new unemployment claims give or take happen every week. 17,000 layoffs is nothing, barely a drop in the bucket. If you actually read something other than conspiracy websites you'd know this too.

burn baby burn said...

There goes another 28,000 homes for sale now. The 17,000 of the people that were "right sized" they will lose their Mc Manson. There are another 9,000 that are going to be transferred and the will need to sell their homes. Good luck with that! Could not happen to a nicer bunch of scum bags!

swivel servant said...

My advice to everyone...if you work in the public sector right now...stay there.

I've seen this story play out quite a few times in my life. Workers in the public sector with their small cost-of-living increases look longingly over the fence at those making out like bandits in the private sector, with their lavish Christmas parties and good times bonuses. Then, when the wheels come off the economic wagon and the heads start to roll, the public sector workers just sit tight and watch the private sector layoff announcements mount with each passing day.

I have the definite feeling that we're at beginning of just such a period.

DM1976 said...

I just remembered this...

I tried to buy a pre-foreclosure and work out a shortsale with CitiMortgage. The house was a little 2 bedroom that needed some cosmetic repairs. It was an expired listing (365+ DOM) and was listed at $117,900. I offered $65k. I figured with with repaies I could get 110k and with 15k in holding and repair costs I'd make a quick $30k.

They said they would absolutly not accept a shot payoff. They wanted a full payoff, which with legal fees, admin fees, etc was now $159k. When I reminded them it didn't sell for $118, they said "We'll just hold it for a few more months and we'll get our money..."

Wonder if that guy was one of the 17k laid off? Probably not, he was probably promoted.

As for the property, it's been 9 months since they've taken it back and they've never listed it. After repair value still is about $110k.

To quote Nelson from The Simpsons... "Ha-Ha!"

I'm waiting till they list it, then I'm sending in an offer for $30k.

burn baby burn said...

I Love my Government job it literally takes an act of Congress to fire me; Talk about job security! There are other upsides to public service like 30 hour work weeks, 2 hour lunches and pensions that will be there. Still love working 80 hours a week corporate drones?