Goldman Sachs to cut 10 percent of work force

No matter where you are in the world, you have be feeling the credit crunch right now. Stocks, banks, real estate, etc. all have come crashing down since the start of 2008.

Everyday a financial bank is in the news, and most of the time it's bad news. Today is no different with reports out that Goldman Sachs will be cutting 10% of it's workforce! Can you believe that!

Can I just go one day without someone getting laid off or seeing the stock market lose 3-5%? This is one year I will always remember for no one can tell me we're not in a recession. At this rate, what will happen in 2009?

Goldman Sachs Group Inc. is cutting about 10 percent of its work force amid the ongoing downturn in the credit and lending markets, a person briefed on the plan said Thursday.

Goldman Sachs will cut about 3,260 jobs. Goldman's work force, which was at record high levels at the end of the third quarter, will be pared back close to 2006 and 2007 levels. No additional cuts are planned, the person said.

The job cuts are a direct result of the current economic environment and significantly lower levels of business activity.

September was considered one of the worst months during the credit crisis as banks essentially stopped lending money to each other for fear they would not be repaid. The problems intensified when Lehman filed for bankruptcy and the government loaned insurer American International Group Inc. $85 billion to help it remain in business.

The increasing turmoil that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and Merrill Lynch & Co. sell itself to Bank of America Corp., Goldman Sachs along with Morgan Stanley received approval to become bank holding companies.

Goldman Sachs and Morgan Stanley made the change to bank holding companies as investors worried the stand-alone investment bank model may no longer be viable. With the new status, Goldman Sachs will likely face increased regulatory scrutiny, which could force it to scale back some of more leveraged and aggressive business units.

Goldman Sachs has widely been considered among the best performing banks amid the ongoing credit and mortgage crisis that began in the middle of 2007. During its fiscal third quarter, which ended Aug. 31, the company's profit fell 71 percent, but that performance was still better than many of its competitors, which have reported quarterly losses throughout much of the year.

Last month, Goldman Sachs struck a deal with Warren Buffett to sell preferred and common stock to Buffett's Berkshire Hathaway. As part of the deal, Buffett planned to invest at least $5 billion in fresh capital to help Goldman Sachs. The investment could double to $10 billion.

But at the rate on which banks are falling right now, I don't see a double happening anytime soon. Unless Mr. Buffett knows something we don't know. We have one more quarter left in this year, so hopefully things will turn around by next year.