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Thursday, July 8, 2010

Wells Fargo Boots Subprime Mortgages, 3800 Workers

These aren't the layoffs Governor Rounds promised us. Wells Fargo is laying off 3800 employees nationwide, including maybe 15–21 South Dakotans at three consumer finance stores in Sioux Falls, Rapid City, and Aberdeen.

The reason is not the 2009 Credit Card Reform Act that Governor Rounds and our Congressional delegation insisted would kill thousands of South Dakota jobs. Wells Fargo ascribes the layoffs in part to the yet-to-be-created Consumer Finance Protection Agency, which will target subprime mortgages. Wells Fargo is getting out of subprime (or, in their subtly shifty language, non-prime) mortgages.

But the big driver of these layoffs is good old merger capitalism:

The San Francisco-based bank said it no longer needed the locations because it now has 6,600 bank branches and 2,200 mortgage offices nationwide after buying Charlotte's Wachovia Corp. in 2008. It said less than 2 percent of its real estate loans were originated through Wells Fargo Financial stores in the first quarter of 2010 [Rick Rothacker and Christina Rexrode, "Wells Fargo Cutting 3,800 Consumer Finance Jobs," Charlotte Observer, 2010.07.07].

It appears Wells Fargo is just seeking efficiency through scale, not suffocating under job-killing government regulation. And to the extent these job cuts are a pre-emptive move to avoid impending regulation of subprime mortgages, shouldn't we actually be glad that fewer people will be making a living on the toxic financial products that got us into this recession?

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