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Bear Stearns workers face job uncertainty

By David Freedlander | dfreedlander@am-ny.com

April 8, 2008

Bear Stearns at 383 Madison Ave. in Manhattan is officially set to become an affiliate of JP Morgan Chase as of April 8th, 2008. The official date for transition and/or layoffs has yet to be determined. A man passes a digitial stock market crawl in the lobby of Bear Sterns. (RJ Mickelson / April 7, 2008)

The bars that ring Bear Stearns' midtown headquarters are still full most weekdays after quitting time, fuller in fact, with former masters of the universe who come to commiserate, share in the latest gossip, and agonize about suddenly unseen futures.

"They come earlier, they stay later, and they drink a little more," said a bartender at Connolly's, on East 47th Street, a few doors down from the offices. Its mahogany bar has hosted Bear's after-work get-togethers for nearly 15 years. "They're a good crowd. I can't imagine what they must be going through right now."

During the past week, amNewYork spoke with several employees at various levels of the company, from maintenance workers to six-figured higher-ups. After a company-wide memo warned workers against speaking to the press, none would talk for the record, but all told of the pain of seeing a company to which they had given their lives fold in an epic collapse. And they expressed fear of what awaits them.

That murky vision gets clearer today, as a firm that has been operating for weeks in suspended animation will be officially absorbed into the company that rescued it, JPMorgan Chase. A spokeswoman for JPMorgan Chase said that the company was still figuring out how many of the 14,000 Bear Stearns employees would keep their jobs, and when those staffing decisions would be made.

That's little comfort to the groups of traders, bankers, and analysts who talk quietly over whiskies and beer at Connolly's, still in shock, still not sure when the other shoe might drop.

"I was off vacationing with my kids," said one banker. "Can you imagine hearing something like that on vacation? What was I supposed to do?"

"I heard 95% of us are getting canned," added another.

Such dire talk among Bear Stearns employees would have been unthinkable just a few months ago. Founded in 1923, Bear Stearns had been a giant in the financial services industry and as of last month was Wall Street's fifth largest investment bank. For the past three years, Fortune Magazine has put it on its annual list of "Most Admired Companies."

Last month however, the financial world was rocked when Bear, overwhelmed by its subprime mortgage debts, stopped receiving loans from other banks, while creditors demanded repayment of loans. Before Bear, and perhaps other vulnerable firms, could collapse, JPMorgan, with the backing of the Federal Reserve, bought Bear for $2 a share. The price has since been upped to $10 a share. A source within JP Morgan said it was unlikely that the Bear Stearns name would survive the company's absorption.

For those who live in the rarified world of six-figure salaries and up, the loss of a future earnings and the obliteration of hundreds of thousands of dollars in company stock will sting.

Andrew Volk, an attorney with the Seattle-based law firm Hagens Berman Sobol Shapiro LLP is filing a class-action lawsuit on behalf of three plaintiffs who represent nearly 9,000 employees who he says were defrauded through their employee stock option plans.

"It is going to be a real hardship for people who are older, who have spent most of their lives with the company," he said. "And those that are younger, they lose part of their nest egg, and it could be a question of selling their houses, getting loans to send their kids to school. It could be a pretty desperate situation."

People tend to become especially guarded in the kinds of situations Bear employees face, as they wonder whose side old allies are on, said Daniel Hughes, director of the Mt. Sinai Employee Assistance Program, which counsels laid-off workers.

"Uncertainty can be very difficult," he said. "You don't know if you are staying or if you're going, the ground is shifting beneath you. You don't want to be impulsive, but being tough and methodical is hard in conditions of uncertainty."

And it's not just employees of Bear. Analysts at the financial research firm Celent released a report last week that said as many as 200,000 people in the commercial banking industry could lose their jobs in the next 12 to 18 months.

"All you can do is prepare for the worst and hope for the best," Hughes said. "Update your resume, work your networks, and above all, don't panic. People get through these situations."

For those on the inside though, it doesn't always seem that way. Bear employees describe a company that felt like a family, and that has descended into a sort of suspended animation, with work on hold until news from the top comes down.

"It's like a morgue," said a veteran Bear Stearns employee. "It's dead up there. I don't want to leave but I can't stay there, not if it's like this."

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Banking on turmoil

A financial research firm said as many as 200,000 jobs in the U.S. banking industry could be lost in the next 12 to18 months. In the past nine months, Wall Street firms have cut more than 34,000 jobs. Since the subprime-mortgage crisis began in July of 2007*:

Citigroup cut 6,200 jobs

Lehman Bros. cut 4,990 jobs

Bank of America cut 3,650 jobs

Morgan Stanley cut 2,940 jobs

Washington Mutual cut 2,600 jobs

* Figures as of March 24. Source: Bloomberg News, from company financial disclosures.