Banks in bother - UBS cuts 3,500 jobs, Goldman legal fears return

Swiss bank UBS has confirmed it is cutting 3,500 jobs, while Goldman Sachs boss Lloyd Blankfein has hired a top defence lawyer...

by Andrew Saunders
Last Updated: 16 Sep 2011
The job cuts at UBS amount to over 5% of its total workforce of 65,000, and the majority will come from the firm’s investment banking and wealth management divisions. Although the firm will incur a one off charge of £423m as a result of the cuts, they should save around £1.5bn by the end of 2013. There was no indication of how many of UBS’s 6,000 UK staff might be at risk.
 
The cuts were fewer than the 5,000 which had been feared, and UBS is far from being the only bank which has announced job cuts recently - everyone from HSBC to Credit Suisse has been busy ‘rightsizing’ their workforces. But perhaps the need to be seen to take remedial action is greater since the firm announced a 23% drop in pre-tax profits for the three months to June this year. Along with most of the industry, UBS is blaming the general economic slowdown - plus those pesky new Basel III requirements that it should hold more capital - for the move.
 
Meanwhile across the pond in Wall Street, Goldman Sachs shares have wobbling, down 5% over fears that the bank's legal wrangle with the US Department of Justice may be about to heat up again. Why? Because boss Lloyd Blankfein has apparently hired himself one the best defence counsels around, one Reid Weingarten, partner in Washington-based law firm Steptoe & Johnson.
 
Although Blankfein has not been charged with any offence, the fact that Weingarten is a specialist in white-collar crime whose previous clients include none other than former Worldcom boss and convicted fraudster Bernie Ebbers, may account for the market jitters. Goldman Sachs insists that it’s all a routine matter - people who expect to be interviewed as part of a legal enquiry do usually hire lawyers, after all…
 
What’s it all about? You will recall that following a two year investigation, a senate committee earlier this year decided that Goldman Sachs misled investors over the sale of mortgage backed securities, and referred the evidence to the DoJ. Carl Levin, who chaired the committee, said at the time ‘In my judgement, Goldman clearly misled their clients and they misled congress.’
 
Blankfein meanwhile vigorously denies any suggestions that his firm acted irresponsibly, and despite its share price fluctuations the sentiment on Wall Street remains generally that criminal charges are unlikely to result from this investigation. But Goldman has already had to cough up one - unrelated - $550m fine to the SEC in recent months, and this latest suggestion that it’s legal travails may not be over will be most unwelcome. Watch this space.

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