Nov. 17 Update: Citi to Slash 50,000+ JobsThis week's news begins with word that banking giant Citigroup will slash more than 50,000 jobs over the next year due to the souring economic outlook. These cuts are in addition to the 22,000 already announced to cut the bank's 375,000 staff. The latest cuts total 20 percent of Citi's workforce.
This news is on top a tough week for the markets. Stocks opened lower, as investors await some key economic reports and the possible bailout for the floundering domestic auto makers. Last week the Dow Industrial Average lost 5 percent, S & P 500 was down 6.2 percent, and the Nasdaq shed 7.9 percent.
European markets were also lower on Monday after the conclusion of the G-20 meeting over the weekend in Washington D.C. While the leaders from members of the Group of 20 nations made no concrete actions to resolve the global financial crisis, they agreed to continue working to provide loans to financial institutions. The group will also move for reforms of the International Monetary Fund and the World Bank to aid developing countries a stronger voice and pledged to not put up trade barriers for the next year.
On Friday the Federal Deposit Insurance Corp. unveiled a plan to stop about 1.5 million home mortgage foreclosures, promising to share any losses with mortgage companies that agree to refinance certain home loans. The FDIC says the plan will cost about $24.4 billion, which could be paid from the U.S. Treasury's $700 billion bailout program for the financial industry. To this point most of the money in the bailout program, the Troubled Asset Relief Program, or TARP, has been injected as capital into banks.
FDIC's Chairman Sheila Bair has lobbied for weeks for a foreclosure prevention plan, and brought forth this plan two days after Treasury Secretary Henry Paulson dismissed government underwriting failing home loans. The FDIC pushed forward with its plan.
The plan would modify 2.2 million mortgage loans and offer financial incentives to mortgage servicers of $1,000 to cover expenses for each loan modified. It also would share up to 50 percent of loss if a modified loan defaulted.
On Sunday, Goldman Sachs CEO Lloyd Blankfein and six company executives said they would renounce their 2008 bonuses.
The seven executives requested the company's central committee in charge of bonuses not to make the payments, citing the company's poor financial performance in 2008. For other executives, their compensation will be decided by company earnings. Goldman Sachs'2008 cycle ends on November 30. On top of receiving $10 billion from the $700 billion bailout fund, the company recently announced that it would eliminate 10 percent of its investment banking staff earlier this summer.