Morgan Stanley climbs aboard the layoff train

Morgan Stanley (NYSE: MS) may cut 5% of its workforce. Given the drop-off in investment banking activity and asset management, the number may not be high enough, but it is a start. Wall Street is still worried about the bank's future, as its stock price shows. Shares change hands at $21, down more than 50% during that last year. Morgan is doing better than some other companies in its sector, but the deepening recession could hurt earnings more than last year.

According to The Wall Street Journal (subscription requited), "The New York firm, which let go of about 7,000 employees last year, may decide on another round of staffing cuts in the next two weeks."

But the cuts need to be increased. If Morgan Stanley does not decide to cap employee bonuses, its cost structure will remain much too high. Politicians are calling for keeping Wall Street pay low, but there is a better reason to cut than outside pressure. Compensation is still too great a part of the expense of running an investment bank. If M&A and wealth management fees are going to keep drying up, the only path to profits is making the labor less costly.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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