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Downturn prompts job cuts at Morgan Stanley, Lehman

January 25, 2008|From Bloomberg News

Morgan Stanley and Lehman Bros. Holdings Inc. will slash about 1,140 jobs as the worst U.S. housing slump in 26 years drags down economic growth along with their profit outlook, according to people familiar with the firms' plans.

Morgan Stanley's cuts will affect asset management, retail brokerage and support areas such as technology and administration, one of the people said.

The positions at Lehman are concentrated in structured finance, commercial real estate, securitization, trading of mortgages and collateralized debt obligations, a second person said.

"The firm is engaged in an ongoing process of assessing its personnel needs in light of overall market conditions, business priorities and individual performance," said Jim Wiggins, a spokesman for New York-based Morgan Stanley. "This process will involve head count reductions in some areas and additions in other areas."

Banks and brokers have eliminated more than 25,000 jobs in the last six months while racking up $136 billion of write-downs and credit losses tied to mortgage securities. Morgan Stanley, which reported its first-ever quarterly loss last month, cut 900 jobs last year from areas that offered mortgages, packaged and traded debt securities and provided high-yield loans.

Lehman, the largest underwriter of mortgage-backed bonds, has already cut 3,750 jobs at subsidiaries that make home loans and shut down one of them last year. Kerrie Cohen, a spokeswoman for New York-based Lehman, declined to comment on the new cuts. Vice Chairman Thomas Russo said earlier Thursday that Wall Street firms would face more head winds this year.

"There are still some credit markets that are frozen," Russo said. "The fixed-income area will probably remain difficult. How difficult will depend on the economy as a whole."

Shares of Morgan Stanley, which have lost 27% in the last 12 months, fell 47 cents, or 0.9%, to $51.23 on Thursday. Lehman shares rose 60 cents, or 1%, to $59.56.

The new cuts at Morgan Stanley will take place over coming weeks and will eliminate about 1,000 jobs, about 2% of the company's workforce.

Lehman's 150 job cuts represent about 4% of workers in the fixed-income division. The company used hedges to avoid the bigger losses reported by some of its competitors.

Morgan Stanley's first-quarter profit is expected to drop 37% from a year earlier, according to a Bloomberg survey of 14 analysts. Lehman will see a 19% drop, analysts estimate.

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