April 9 (Bloomberg) -- Kenneth Moelis, the former president of UBS AG's investment bank, said Wall Street firms may have to eliminate as much as 35 percent of employees as leveraged lending dwindles and the pace of mergers and acquisitions slows.
``The Street got staffed up to support what was a slight bubble in M&A,'' Moelis, 49, said in an interview on Bloomberg Television today. ``You're going to see a significant retrenchment.''
Moelis resigned from UBS, Switzerland's largest bank by market value, a year ago and now runs Moelis & Co., an investment banking boutique. Some of the largest financial ``conglomerates'' may break up as Wall Street shifts focus from lending to its clients to furnishing them with strategic advice, he said. Wall Street banks hit by mortgage losses and writedowns have cut more than 34,000 jobs in the past nine months, the most since the dot-com boom fizzled in 2001.
``They're going to have to go back out and remember that their client is a relationship, not a counterparty,'' said Moelis, who is based in Los Angeles....
As I have been saying, by the end of the summer we are likely going to see reported unemployment North of 10%. Employers accross America ramped up hiring because of a party of spending directly related to credit expansion. Now airlines are shutting down completely or imposing hiring freezes. Homebuilders are building less than half the homes they built just a couple years ago. Mortgages companies have shut down by the hundreds. Here comes Wall Street with some estimates calling for 35% of jobs to be cut.
The math is simple. We are seeing technology companies, pharma companies, and governments cutting by 10% or more as a matter of routine. Add that to the above with the current 5% unemployment rate and exceeding 10% by the end of the summer seems like an easy call....it could be 15% if credit remains constrained. Remember, if banks are the only ones able to get money to repair credit defaults, few are spending simply to maintain current status quo.