Wave of Wall Street layoffs could see jobs shipped to India

A heavy axe is being swung through Wall Street.

In what’s projected as the first wave of layoffs , investment banks including HSBC, Credit Suisse, Lloyd’s Banking Group, and Goldman Sachs are set to issue pink slips to its employees because of weak markets, uncertainty over new federal financial regulations, and concerns about the European economy.

Goldman Sachs is the latest investment bank to confirm that it will reduce its head count . The firm filed documents on Wednesday with the New York Department of Labour stating that it planned to lay off 230 New York City employees for “economic” reasons beginning in September.

Meanwhile, Bank of New York Mellon Corp. has plans to cut 124 jobs starting July 1, and Bank of America and Wells Fargo have both eliminated jobs .

This is not just a phenomenon in the US. Consider the cuts to the financial sector globally:

• Credit Suisse plans to cut more than 600 jobs , including some 100 positions in its London office.

• Royal Bank of Scotland will lay off 200 investment bankers in the U.K. and Europe.

• Lloyds plans to slash 15,000 jobs by 2014.

• HSBC will let go of 700 UK bankers and 140 posts won’t be filled.

• Banco Popolare of Italy said it was cutting 1,120 jobs ; Intesa Sanpaolo, is also eliminating 3,000 jobs under a three-year business plan.

Why it’s raining pink slips

The industrywide cuts are a residual effect of the financial crisis, according to The New York Times .

In the wake of public outrage over Wall Street pay, financial services firms trimmed annual bonuses last year, which tended to be paid in stock as a way of connecting pay with performance.

But to make up for the smaller bonuses, many firms raised base salaries and as a result, “the new pay structure is now having an unintended consequence: It is perverting Wall Street’s calculus during periods of weakness,” wrote New York Times’ Andrew Ross Sorkin. “In the past, banks could cut variable costs like bonuses when profits slipped, rather than handing out pink slips en masse. Now, fixed costs like salaries make up a higher portion of their expenses. So layoffs are starting to look more attractive.”

Rainmakers safe

But big deal-makers can breathe a sigh of relief-the bloodletting on Wall Street seems to primarily affect trading teams, IT employees, and support staff.

“People aren’t going to send their rainmaker away,“one London headhunter told Reuters .“It’s more about efficiencies, streamlining and outsourcing. It’s going to affect support functions in particular.”

India’s gain?

Speaking of outsourcing, some American observers are already fretting about the overall loss to US workers, since some of these investment bank jobs are being sent abroad.

Goldman, for example, is sending jobs to Singapore, Brazil, and India .

For the pro-business set, the scapegoat in all of this is the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act , which introduced the most significant changes to US financial regulation since the Great Depression.

“Just about every major US bank is looking at outsourcing as a way to pay for the new costs of doing business as regulators hammer out new rules,” assertedCharles Gasparino , a_New York Post_ columnist.

He continued: “The winners are places with well-educated, English-speaking workforces plus lower taxes and less regulation-in Goldman’s case, Singapore and India.”