A swift reversal of fortune
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KAI RYSSDAL: Citigroup, JP Morgan, Bank of America and Wachovia went public with their borrowing habits today — $500 million apiece from the discount window at the Federal Reserve. That’s the interest rate the Fed cut Friday morning as a way to get cash flowing again on Wall Street. And in the short term, at least, it seems to have worked. There was a third-straight day of relative calm in the stock markets.
But there are still some unsettling noises coming from the housing and mortgage industries: Today, Accredited Home Lenders and Lehman Brothers became the latest to announce they’re shutting down their subprime mortgage businesses and making deep cuts in their workforces. Add it up and in just the past few weeks, tens of thousands of people in the lending business have lost their jobs.
Marketplace’s Senior Business Correspondent Bob Moon has more.
Bob Moon: In relative terms, experts say the job losses are neither surprising nor alarming. It’s the swiftness of this reversal of fortunes that employment consultant John Challenger finds so stunning:
John Challenger: Many of these mortgage companies have just stopped on a dime. They’ve come to a screeching halt. They’ve told their employees, “Don’t take any calls, don’t write any more loans, we can’t go forward with these operations.”
Challenger says that means thousands of call-center workers, data processors and their supervisors are sitting idle. He says it’s fortunate the damage is spread out across the country and not hitting any particular geographic area. That’s little consolation, though, for some 21,000 mortgage industry workers who Challenger figures have been fired since the start of August.
Chicago-based investment manager Marshall Front expects the long list of belly-up lenders to keep growing — but not become so big that it will cause serious trouble.
Marshall Front: We’re in a period of consolidation that’s not going to be pleasant. Will it bring our economic expansion to a halt and cause a recession? No.
But there have been some contagious effects. At Moody’s Economy.com, senior economist Zoltan Pozsar says it’s been hitting related business, from landscaping and interior decorating to real estate appraisers.
Zoltan Pozsar: We have created 1.3 million housing-related jobs between 2003 and 2005. Since then, we have lost 260,000. And I think when all this is said and done, about half of the jobs that were created in housing-related industries during the housing boom will be lost.
Painful though that may be, Pozsar says this limited contraction could actually be beneficial overall. He says it should moderate consumer spending and help keep a lid on inflation.
In Los Angeles, I’m Bob Moon for Marketplace.
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