Monday, July 23, 2007

More layoffs in the lending industry

Late last week both WaMu and Indymac announced they’ll be laying off hundreds of employees in an effort to cut costs and down-size to match current market conditions. Indymac will fire some 400 staff members, or “roughly 4%” of its workforce in the coming weeks, according to an e-mail from the lender’s CEO, Mike Perry, which was distributed to all Indimac employees. Of course it contained many good words about how the company tries to avoid layoffs whenever possible, and how hard it was to fire these people; it also doesn’t fail to mention how Indimac is better than its competitors. For example here:

Most companies in the mortgage industry employ layoffs as standard operating practice, staffing up in good times and letting people go as soon as loan volume falls off. I have never been a fan of this practice

And here:

while most other companies in our industry pay very little, if any, severance, Indymac has a generous severance package for laid off employees

Or here: “many of our competitors are cutting much more deeply”.

I’m afraid I don’t understand why a CEO would employ such marketing means in a letter to employees, but he probably has some reason for it. Certainly the mail was distributed to all staff members, including those who get to stay with the company. Maybe he was feeling just a little bit guilty and trying to convince himself that others are no better? Or perhaps Indimac fears that their employees may decide to leave and join the competition? It doesn’t sound realistic, given that nearly all lenders are cutting workforce in today’s market. Take Washington Mutual: 210 employees will be gone by August because their jobs at subprime loan fulfillment centers are being eliminated. Subprime lending is shrinking, and dragging home sales with it. Even more disturbing, some states are already admitting that they’re either on the verge of, or experiencing a recession.

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