The biggest global banks are cutting jobs at the fastest rate since 2008 as a weak U.S. economy squeezes revenue, regulators push firms to hold more capital and companies restructure businesses to improve profitability.
The 50 largest banks, including HSBC Holdings Plc (HSBA), Credit Suisse Group AG (CSGN) and Bank of America Corp. (BAC), disclosed plans for almost 60,000 reductions since Jan. 1, according to company statements and data compiled by Bloomberg Industries. At that pace, they’ll cut more than 101,000 jobs this year -- the most since 192,000 positions were targeted in 2008 amid loan losses, a global credit crunch and unprecedented government bailouts.
HSBC’s aim to shed 30,000 workers, unveiled by the London- based firm on Aug. 1, was the single biggest job-cutting announcement since Bank of America said in December 2008 that it would eliminate as many as 35,000 positions, the data show.
Persistent low interest rates, stagnant loan growth and new rules for debit cards will crimp U.S. bank earnings this year. Global regulators, seeking to avoid a repeat of the financial crisis and blunt the impact of potential European sovereign debt defaults, are pushing banks to hold more capital. Firms including Goldman Sachs Group Inc. (GS) are seeking to pare costs in some countries while expanding in faster-growing economies, such as China, India and Brazil.
The following table lists global banks, including those outside the 50 largest, that have announced at least 500 job cuts so far this year, as well as their total employees as of Dec. 31, according to Bloomberg data. For companies that disclosed a range of reductions, the table shows the top limit. Many reductions are being made over months or years, and some firms have said they are simultaneously hiring in other areas.

Bank                  Job Cuts     Total Headcount    Cuts as
                      Announced    as of Dec. 31      % of
                      in 2011                         Dec. 31
                                                      Headcount

HSBC Holdings Plc,    30,000       295,061            10%
U.K.

Intesa Sanpaolo SpA,  3,000        102,000            2.9%
Italy

Lloyds Banking Group  16,800       104,000            16%
Plc, U.K.

Banca Monte dei       2,500        31,400             8%
Paschi di Siena SpA,
Italy

Credit Suisse Group   2,025        50,100             4%
AG, Switzerland

Allied Irish Banks    2,000        14,255             14%
Plc, Ireland

Barclays Plc, U.K.    3,000        147,500            2%

Bank of America       1,575        286,951            0.5%
Corp., U.S.

Banco Popolare SC,    1,120        20,000             5.6%
Italy

Unione di Banche      1,000        19,700             5.1%
Italiane ScpA, Italy

Goldman Sachs         1,000        35,700             2.8%
Group Inc., U.S.

Grupo Financiero      1,000        25,000*            4%
Banorte SAB, Mexico

Synovus Financial     850          6,109              13.9%
Corp., U.S.

State Street Corp.,   850          28,670             3%
U.S.

UniCredit SpA, Italy  700          160,000            0.4%

Erste Group Bank AG,  550          50,272             1.1%
Austria

American Express      550          61,000             0.9%
Co., U.S.

UBS AG, Switzerland   500          64,617             0.8%

* Headcount reflects Grupo Financiero Banorte’s acquisition of
Ixe Grupo Financiero SAB, which was completed in April.

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President Barack Obama’s administration will bypass Congress to override the nation’s main public-education law, granting waivers to states if they agree to his schools agenda.
States can avoid the No Child Left Behind law’s 2014 deadline for achieving 100 percent proficiency on standardized state reading and math exams if they sign off on yet-unspecified administration “reforms,” U.S. Education Secretary Arne Duncan and White House domestic policy adviser Melody Barnes said Aug. 5 in a press briefing.
Saying Congress has failed to take action to fix the nine- year-old law, the U.S. Education Department will offer states waivers as soon as this school year. Duncan opposes the legislation’s focus on holding schools accountable only through testing proficiency, which he has said encourages dumbed-down standards. About 80 percent of U.S. schools risk being labeled failing if the law isn’t changed.
“I can’t overemphasize how loud the outcry is for us to do something now,” Duncan said.
Duncan in June said the administration would grant the waivers if Congress failed to approve legislation changing it by the start of this school year -- a deadline the legislature isn’t likely to meet.

Washington Gridlock

The administration’s waivers “could undermine” congressional efforts to change No Child Left Behind, John Kline, the Minnesota Republican who chairs the House education committee, said in a statement. Kline said he will be monitoring Duncan’s actions “to ensure they are consistent with the law and congressional intent.”
Kline’s committee is working on a series of bills to change the law. They include promoting the growth of charter schools -- privately run public schools -- and cutting spending by eliminating half of the federal education programs under the current law.
Tom Harkin, the Iowa Democrat and Senate education committee chairman, said he still hopes the Senate can produce a “comprehensive bill” reauthorizing No Child Left Behind.
“That said, it is undeniable that this Congress faces real challenges reaching bipartisan, bicameral agreement on anything,” Harkin said in a statement.
No Child Left Behind, signed into law in 2002, is former President George W. Bush’s signature education initiative. Officially called the Elementary and Secondary Education Act, the law requires schools to show that all students are proficient on state standardized reading and math tests by 2014. Schools also must demonstrate yearly progress toward that goal or risk losing federal money.

Specifics in September

Though specifics haven’t been set, schools would be released from that deadline and annual progress requirements if they agree to such changes as raising academic standards and evaluating teacher effectiveness based on student achievement and other measures, Duncan said. The department will make details public in September.

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Standard & Poor’s lowered credit ratings on debt issued by Fannie Mae, Freddie Mac, and other lenders backed by the federal government, citing the U.S. loss of its AAA status.
The mortgage finance companies were lowered one step from AAA to AA+, S&P said in a statement today. The downgrade reflects their “direct reliance on the U.S. government,” S&P said.
Fannie Mae and Freddie Mac were placed into government conservatorship in September 2008 as losses tied to subprime mortgage lending pushed them toward insolvency. Since then, the two government-sponsored enterprises, or GSEs, have drawn almost $170 billion in federal aid. The GSEs own or guarantee more than half of U.S. mortgage debt.
The downgrades of Washington-based Fannie Mae, Freddie Mac of McLean, Virginia, and other government-backed debt was predicted by some analysts after S&P lowered the U.S. sovereign credit rating by one level on Aug. 5. On Friday, banking regulators including the Federal Deposit Insurace Corp. said that government-issued securities would be “unaffected” by the sovereign downgrade.
Yields on GSE bonds jumped to their highest relative to U.S. Treasuries in more than two years. The downgrade was only part of the reason for the wider spreads, said Walt Schmidt, a mortgage strategist in Chicago at FTN Financial, in a note to clients. He said the spreads are “based on uncertainties regarding prepayments and supply, not credit-based downgrade fears.”

More Downgrades

The credit rating company today also downgraded the senior debt of 10 of the nation’s 12 Federal Home Loan Banks, from AAA to AA+. The home loan banks sell bonds and provide liquidity to banks and mortgage investors. The banks’ debt has an implied government guarantee.
“The FHLB system is classified as being almost certain to receive government support if necessary” S&P said.
The home-loan banks of Chicago and Seattle are already rated AA+ and did not receive a further downgrade from the rating company.
S&P also lowered, by a notch, debt issued by the Farm Credit System, which guarantees agriculture-related loans, the FDIC, which guarantees bank deposits, and the National Credit Union Association, which guarantees credit union deposits.

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Congressional leaders, leaving no extra time before a default threatened for tomorrow, are racing to push through a compromise sealed with President Barack Obama last night to raise the U.S. debt limit by at least $2.1 trillion and slash government spending by $2.4 trillion or more.
The House plans votes today and the Senate may follow suit to consider the agreement reached during a weekend of negotiations that capped a months-long struggle between Obama and Republicans over raising the $14.3 trillion debt ceiling.
Both parties were working to sell the deal to their rank and file -- meeting resistance from some Democrats who fault it for failing to increase taxes and from a faction of Republicans who say it’s insufficient to rein in the debt.
House Republicans plan to discuss the measure in a party caucus at 12:30 p.m., according to a congressional aide. Vice President Joe Biden plans to attend meetings of the House and Senate Democratic caucuses to rally support.
Representative Steny Hoyer, the second-ranking Democrat in the House, said a majority of House Republicans must vote for the measure if it is to pass. The Maryland Democrat, appearing on Bloomberg Television, said leaders have missed an opportunity for a more “balanced” agreement, yet the nation cannot afford to default on its obligations.

At Least 121

“The Republicans are going to have to offer a very substantial number of votes” to pass the measure, Hoyer said, adding that he expected “at least 121.”
“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said in an appearance in the White House briefing room last night as congressional aides were drafting the legislative language. “This compromise does make a serious down payment on the deficit-reduction we need. Most importantly, it will allow us to avoid default.”
U.S. stocks rose. The Standard & Poor’s 500 Index rose 0.9 percent to 1,303.43 at 9:37 a.m. in New York. The Dow Jones Industrial Average gained 96.95 points, or 0.8 percent, to 12,240.19.
Treasuries pared losses. Yields on two-year debt touched the lowest level since July 19. Ten-year notes earlier fell the most in more than one week.
The yield on the benchmark 10-year note climbed one basis point to 2.80 percent as of 8:35 a.m. in New York, according to Bloomberg Bond Trader prices. The security yielded 2.77 percent at the end of last week, the least since Nov. 30.

Two-Year Notes

Yields on two-year notes were little changed at 0.36 after touching 0.35 percent. Thirty-year bonds yielded 4.15 percent, three basis points more than their previous close.
Credit-default swaps on Treasuries dropped eight basis points to 53, the biggest retreat since February 2010.
“The threat of default is now for certain off the specter of this economy, no longer a headwind” for the U.S. economy, Gene Sperling, director of the National Economic Council, said today on Bloomberg Television.
The Treasury Department has said it will reach the borrowing limit and run out of options for avoiding default tomorrow without action by Congress to raise the debt ceiling. Congressional leaders expressed optimism they would avoid that risk -- however narrowly.
Senate Majority Leader Harry Reid, a Nevada Democrat, said he was relieved to announce “a historic bipartisan compromise that ends this dangerous standoff,” adding that Republicans and Democrats would have to unite to push it through.

Not ‘Greatest’

House Speaker John Boehner of Ohio told fellow Republicans in a conference call around the same time that the deal wasn’t the world’s greatest, yet showed that their party had changed the debate in Washington, according to an official familiar with the conversation.
Senator Jim DeMint, the South Carolina Republican who co- founded the Senate’s Tea Party Caucus, said he won’t try to block action on the debt-ceiling increase.
DeMint, a fiscal conservative known for using Senate procedures to stymie legislation he opposes, said he may seek to slow consideration of the bill while he studies the details.
“If they throw it on the floor and want us to vote an hour later, that isn’t going to happen,” DeMint said in an interview.

Learning the Details

Lawmakers who were to vote within hours on the measure were just learning its details. It would raise the debt ceiling in two installments, sufficient to serve the nation’s needs into 2013. The framework, as detailed by officials in both parties, would cut $917 billion in spending over a decade, raise the debt limit initially by $900 billion and assign a special congressional committee to find another $1.5 trillion in deficit savings by late November, to be enacted by Christmas.
If Congress met that deadline and deficit target, or voted to send a balanced-budget constitutional amendment to the states, Obama would receive another $1.5 trillion borrowing boost.
In the case of Congress failing to take either step, or not producing debt savings of at least $1.2 trillion, the plan allows the president to obtain a $1.2 trillion debt-ceiling extension. Still, that would trigger automatic spending cuts across the government -- including in defense and Medicare -- to take effect starting in 2013. The Medicare cuts would only affect provider reimbursements, not benefits.

$400 Billion

An initial $400 billion increase in borrowing authority couldn’t be blocked under the deal. While Congress would get a chance to avert both debt-limit increases through disapproval resolutions, there’s little chance opponents could muster the two-thirds majorities needed in both chambers to override Obama’s veto.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, said the agreement wouldn’t be final until members of his party had the chance to evaluate it. “But at this point, I think I can say with a high degree of confidence that there is now a framework to review that will ensure significant cuts in Washington spending,” and that there would be no default, he said.
Representative Marsha Blackburn, a Tennessee Republican, said today she was reserving judgment until the Congressional Budget Office weighed in with its savings estimate.
“We don’t any more budget tricks, we don’t want any more accounting gimmicks,” Blackburn said on Bloomberg Television.

Concessions

In the final stage of negotiations, both sides made concessions. Republicans dropped their insistence on withholding some of the borrowing authority until future spending cuts had been made and a balanced budget amendment to the Constitution had been passed by both chambers of Congress. Those terms were included in a bill the House passed narrowly and along party lines July 29, only to see the measure defeated in the Senate less than 24 hours later.
The White House agreed to forgo an automatic tax increase, a sticking point for Republicans, as one of the consequences to kick in if no debt-reduction law was enacted by Christmas.
Even so, Obama has an opportunity to increase revenue in the future if he opts to allow the tax cuts enacted under George W. Bush to expire as scheduled in 2013. Even if Obama lost his re-election campaign next year, he could veto legislation to extend those cuts before leaving office -- producing an estimated $3.5 trillion.
White House officials said the enforcement mechanisms will help them press Obama’s agenda as further deficit reductions are made, including additional tax revenue.

Automatic Cuts

The automatic spending cuts would include deep reductions in the defense budget, which Republicans oppose. That measure preserves leverage for Democrats in committee negotiations, the officials told reporters on condition of anonymity.
Because any spending cuts would be delayed until 2013, timed to coincide with the expiration of the Bush tax cuts, Republicans would have an added incentive to agree to overhaul taxes, which Democrats want to use for raising revenue.
Republicans argue that while the super-committee could propose tax increases, it wouldn’t likely do so, because the rules of the deal require that it assume -- as the Congressional Budget Office does -- the Bush tax cuts expire as scheduled at the end of 2012. That would mean that to count any new revenue toward deficit reduction, the committee would need to both erase the Bush tax reductions and then generate additional revenue on top of that.

Balanced-Budget Amendment

In addition to guaranteeing a vote on the balanced-budget constitutional amendment between October and the end of the year, the agreement could give Republicans a chance to renew their push for the measure at the height of 2012 campaigns.
If Congress failed to enact the deficit-reduction package, it would either have to transmit the amendment to the states or automatic spending cuts would be trigged. Republicans could argue that the amendment -- which takes a two-thirds vote in both houses to be sent for ratification to the states -- was the only alternative to painful spending reductions.
Some Democrats said they wanted no part of a deal that would omit any tax increase while cutting deeply into government spending and threatening still more reductions to safety-net programs such as Medicare.
“This deal does not even attempt to strike a balance between more cuts for the working people of America and a fairer contribution from millionaires and corporations,” Representative Raul Grijalva, the Arizona Democrat who leads the Progressive Caucus, said in a statement. “I will not be a part of it.”

No Backing

House Minority Leader Nancy Pelosi of California offered no backing for the measure in a statement last night, nor promised any Democratic votes. With a morning gathering of Democrats planned behind closed doors, she said, “I look forward to reviewing the legislation with my caucus to see what level of support we can provide.”
Some Republicans also voiced disappointment with the measure. Senator Ron Johnson of Wisconsin said he was “highly concerned” about the size of the deficit narrowing being discussed, calling it too small to make a real difference in reining in the debt.
“I’m afraid this is not going to fix the problem, and that’s the one reason I came here,” said Johnson, a first- termer elected with Tea Party support.
While the compromise will probably assuage immediate concerns about a default in financial markets, “this relief will be short,” said Mohamed A. El-Erian, chief executive officer of Pacific Investment Management Co., the world’s largest manager of bond funds.

Standard & Poor’s

If S&P “sticks to what it said, it will downgrade” the U.S. debt following the deal, El-Erian said in an interview on ABC News “This Week.” The ratings company warned that the U.S. may lose its top AAA sovereign grade depending on the contents of the debt deal.
Peter Orszag, vice chairman of global banking at Citigroup Inc. and former director of the Office of Management and Budget in the Obama administration, told Bloomberg Television today that there was a “real risk” of a ratings downgrade.
Sperling said credit rating services were closely watching whether increases in the debt ceiling would be dependent on multiple votes in Congress over a period of several months. That prospect is no longer the case, he said.
“We’ve taken that cloud of uncertainty from default off our economy, not only for the rest of this year but for the rest of next year as well,” he said.

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President Barack Obama said tonight that leaders of both parties in the U.S. House and Senate had approved an agreement to raise the nation’s debt ceiling by $2.1 trillion and cut the federal deficit by as much as $2.5 trillion over a decade, a deal that must now be sold to Congress.
“The leaders of both parties in both chambers have reached an agreement that will reduce the deficit and avoid default,” Obama said at the White House. “This compromise does make a serious down payment on the deficit-reduction we need. Most importantly it will allow us to avoid default.”
Congressional leaders reached a bipartisan agreement to raise the debt ceiling by at least $2.1 trillion, sufficient to serve the nation’s needs into 2013. They are preparing to sell to members the deal to cut $917 billion in spending over a decade, raising the debt limit initially by $900 billion, and to charge a special committee with finding another $1.5 trillion in deficit savings by the year’s end. They confront an Aug. 2 deadline for approval of the agreement.
“This goes a long way to reducing the risk of default by the U.S. government,” Tom Quarmby, head of regional banking research at Barclays Capital in Hong Kong, said in a Bloomberg Television interview. While many hurdles remain, the deal “gets them out of a lot of trouble in the near term,” he said.

Market Reaction

The dollar and oil prices climbed, and gold fell. U.S. currency rose 1.3 percent to 77.79 yen and 0.2 percent to $1.4376 per euro at 9:44 a.m. in Tokyo. Gold slid 1.1 percent to $1,610.70 an ounce. Crude oil for September delivery rose 1.6 percent to $97.19 a barrel on the New York Mercantile Exchange.
Futures on the benchmark Standard & Poor’s 500 Index of stocks ended a seven-day losing streak, gaining 1.5 percent to 1,308 as of 10:54 a.m. in Tokyo.
With just two days left before the Treasury Department had said the nation would default without additional borrowing authority, both sides made concessions. Republicans dropped their insistence on withholding some of the borrowing authority until future spending cuts had been made and a balanced budget amendment to the Constitution had been passed by Congress.

Tax Revenue

The White House agreed to forgo an automatic tax increase as one of the consequences to kick in if no debt-reduction law is enacted by Christmas.
Obama has an opportunity to increase revenue in the future if he opts to allow tax cuts enacted under George W. Bush to expire as scheduled in 2013. Even if Obama lost his re-election campaign next year, he could veto legislation to extend those cuts before leaving office -- raising $3.5 trillion.
Shortly before Obama spoke, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell took to the Senate floor to endorse the accord. Reid said “reasonable people” were able to agree on a deal and the nation and Congress were “moving forward together.” Reid, of Nevada, said Senate Democrats would meet tomorrow at 11 a.m. to discuss the package.
The agreement calls for cutting $917 billion over a decade and immediately raising the debt limit by $900 billion, then forming a special congressional committee to find another $1.5 trillion in deficit savings by year’s end, according to a summary Speaker John Boehner circulated to House Republicans.

Automatic Cuts

If the super-committee’s work failed to yield at least $1.2 trillion in debt reduction, sweeping automatic spending cuts would go into effect. These would inlcude cuts in defense programs and Medicare, although other programs -- including Social Security, Medicaid veterans, and civil and military retirement -- would be exempted. Cuts to Medicare spending would only affect provider reimbursement rates, not benefits, and would be limited to 2 percent.
In a nod to fiscally conservative and Tea Party-aligned lawmakers who wanted to condition any borrowing boost on passage of a balanced-budget amendment to the Constitution, the measure calls for a vote of both houses of Congress on such a measure sometime after Oct. 1 and by the end of the year.
It would allow Obama to ask for the second debt-ceiling increase after the super-committee’s deficit-reduction recommendations were enacted or after the constitutional amendment was sent to the states.
Still, even if neither of those things happened, Obama would be able to get the remaining $1.5 trillion debt-ceiling extension and the automatic spending cuts would go forward.
Congress could try to block the borrowing increase with a disapproval resolution, yet would almost certainly fail to muster the two-thirds majorities in the House and Senate to override the president’s veto.

Boehner Apology

Boehner, of Ohio, apologized to rank-and-file Republicans in a conference call for having to rush the measure to the floor as soon as possible, while telling them it represented a victory over Obama and his debt-ceiling demands, according to a Republican aide familiar with the discussion.
Boehner said he had forced Obama to give up his initial demand for a “clean” borrowing increase -- one without anything attached -- as well as his later call for a “balanced package” that included revenues as well as spending cuts to shrink the deficit. The deal, Boehner said, is all spending cuts and has nothing that violates Republicans’ principles.
Both sides encountered resistance to the accord from within their own ranks.
Republican Senator Ron Johnson said he was “highly concerned” about the size of the cuts, saying they were too small to make a real difference in reining in the debt.

Not a ‘Fix’

“I’m afraid this is not going to fix the problem, and that’s the one reason I came here,” said Johnson, a first- termer elected with Tea Party support.
Socially liberal groups and lawmakers expressed anger at the package because it omits revenue increases while cutting deeply into government spending and threatening still more reductions to safety-net programs such as Medicare.
“This deal does not even attempt to strike a balance between more cuts for the working people of America and a fairer contribution from millionaires and corporations,” Representative Raul Grijalva, the Arizona Democrat who leads the Progressive Caucus, said in a statement. “I will not be a part of it.”

‘Balanced Approach’

Obama and congressional Democrats have insisted that any deal be a “balanced approach” that includes revenue, raising questions about whether the president would find substantial support from his party for the plan.
While the compromise shaping up will probably assuage immediate concerns about default in financial markets, “this relief will be short,” said Mohamed A. El-Erian, chief executive officer of Pacific Investment Management Co., the world’s largest manager of bond funds.
If Standard & Poor’s “sticks to what it said, it will downgrade” the U.S. debt following the deal, El-Erian said in an interview on ABC News “This Week.”
S&P, which has given the U.S. a top AAA ranking since 1941, said on July 14 that the chance of a downgrade within three months is 50 percent, and a reduction may occur as soon as August if there isn’t a “credible” plan to reduce the nation’s deficit.
The agreement “does nothing to restore household and corporate confidence, so unemployment will be higher than it would have been otherwise,” El-Erian said. “Growth will be lower than it would be otherwise. And inequality will be worse than it would be otherwise.”

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