Bear Stearns Cos., the fifth-largest U.S. investment bank, on Wednesday said it will cut 4 percent of its staff in further fallout from the summer's mortgage turmoil.
The company will cut 650 jobs in all departments from its staff of about 15,500. This marks the third wave of layoffs at the battered investment bank, which as of last month had cut about 900 positions throughout the firm.
Bear Stearns has been among the hardest hit on Wall Street as investment banks reel from deterioration in the subprime mortgage and leveraged loan markets. The biggest global investment houses and major banks collectively wrote down some $80 billion worth of assets because of the market crisis this summer.
Earlier this month, Bear Stearns said that in the fourth quarter it would write down another $1.2 billion linked to losses from its mortgage-backed securities business. The reduction will result in a quarterly loss for the company.
The latest round of job cuts puts even more stress on Chief Executive James Cayne, whose leadership has been under scrutiny since Bear Stearns announced the collapse of two hedge funds in July. Rival Merrill Lynch & Co. ousted CEO Stan O'Neal earlier this month, and Citigroup Inc. did the same to Chuck Prince a week later.
Cayne, who owns about 4 percent of Bear Stearns, has refused to relinquish control of the struggling firm. Instead, he pushed out former president Warren Spector in August. Spector did not receive a severance, but was allowed to keep stock and option awards worth about $23 million, according to a regulatory filing.
The investment bank said in a memorandum distributed to employees that was obtained by The Associated Press that the current round of job cuts was part of an ongoing review "to best position Bear Stearns for 2008 and beyond." Employees affected would get severance, benefits and outplacement services, the memorandum said.
Russell Sherman, a spokesman for Bear Stearns, said the jobs cuts would come from across the firm and were not restricted to one particular business. However, a person familiar with the layoffs who was not authorized to speak publicly on the matter said cuts would likely come from the operations side of the business — including information technology and legal and compliance departments.
In October, Bear Stearns cut 300 jobs from areas including its equity trading business. The company, which is America's second-biggest underwriter of mortgage bonds, also slashed about 600 positions from its mortgage-origination unit.
Shares of Bear Stearns rose $3.67, or 3.9 percent, to $99.10 in midday trading.