The Most Brutal Layoffs Yet: Bank Of America Could Slash Up To 30,000 Jobs (BAC)

Bank of America might lay off up to 30,000 people in the coming years, according to a report in the Charlotte Observer.

That means it could cut over 10% of its 288,000 employees worldwide, making BofA the bank with the most brutal layoff plans we've heard yet, second only to HSBC's plans to layoff 30,000 of its 300,000 strong workforce. 

Sources familiar with the firm announced the mass layoffs soon after the FHFA filed a huge lawsuit against Bank of America over $30.85 billion in losses on mortgage securities.*

The unfinalized plans are to cut over 10,000 and up to 30,000 employees in the next few years.

The reason for them is simple.

The massive cuts are partly to make up for what are expected to be huge lawsuit-related losses over the firm's and Countrywide's role in the mortgage crisis. Bank of America bought Countrywide, the country's largest mortgage lender, in 2008.

Also, it needs to downsize anyway. JPMorgan is more profitable and has around 38,000 fewer employees.

This is just one of many of Bank of America's efforts to cut costs and shore up capital in advance of the 2013 capital requirements mandated by Basel III.

*(BofA isn't alone. The FHFA announced similar lawsuits against nearly every one of the U.S. bulge bracket banks, all of which are named here.)

Wall Street layoffs to hit en masse this fall >

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China Is About To Slash Income Taxes For 60 Million People

Some 60 million Chinese will wake up newly exempt from income tax tomorrow morning, as the government tries to boost poorer peoples’ spending power and fuel sustainable economic growth.

Though a few top earners will pay more, almost everyone else will get a break, according to Finance Ministry calculations.

“This is good news for most people, especially low- and middle-income employees,” says Yi Xianrong, a finance expert at the China Academy of Social Sciences think tank.

The tax break offers consumers some relief in the face of high inflation, which was running at an annual rate of 6.5 percent last month and eating into family budgets.

The biggest beneficiaries will be those at the bottom of the tax scale. The lowest rung of the income-tax ladder has been raised from 2,000 renminbi ($313) per month to 3,500 RMB ($547). The average Chinese wage is around 3,000 RMB a month.

The tax reform, made more generous after a wave of online protest against earlier government proposals for stingier changes, means that only about 8 percent of Chinese will pay any income tax at all, according to Wang Jianfan, deputy director of the Finance Ministry’s tax policy department.

Like many developing countries, China relies very little on hard-to-collect income tax for its revenue. Last year it raised only 6.6 percent of its taxes from personal income. Instead, the government goes after the business sector, which is easier to monitor.

Raising the income tax threshold will cost the government 160 billion RMB ($25 billion) in lost revenue, according to the Finance Ministry, but this is “no big deal” for Chinese public finances, according to Arthur Kroeber, head of the Beijing-based Dragonomics economic consultancy.

“Fundamentally, China’s fiscal conditions are very strong”, Mr. Kroeber says, pointing to government estimates of a budget deficit below 2 percent this year.

What the government gets for its $25 billion, says Dr. Yi, is goodwill at a time when ordinary people are grumbling increasingly loudly about rocketing food prices. “If people’s purchasing power goes up, that is good for social stability,” Yi says.

Household income has been falling as a share of GDP, relative to corporate and government revenues, for several years, but the new tax breaks are unlikely to reverse that trend because income tax plays such a minor role in China’s economy.

“If the government wants to redistribute income from the corporate to the household sector, tax policy is not going to do the trick,” warns Kroeber.

This post originally appeared at The Christian Science Monitor.

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