The News: In September, brokerage firm Charles Schwab laid off 600 employees. In a Wall Street Journal interview the company cited the “challenging economic environment” for the layoffs.
Who It Affects: Brokers and broker firms feel the effects of dropping interest rates.
Why It’s Important: Brokerage firms have been doing well in recent years. Schwab, which holds over $3.5 trillion in assets, grew to over 20,000 employees. These rate cuts hit brokerage firms and brokers hard because lower short-term interest rates also lower the rates that electronic brokers can charge for managing customers’ assets.
Background: The Federal Reserve has lowered interest rates three times this year. The third rate dropped occurred last week with the Fed continuing to slash rates in an effort to combat sluggish economic growth.
What’s Next: Schwab CEO Walter Bettinger said he does not see more layoffs in the future. “We don’t anticipate having to revisit that in the near term,” Bettinger said.
Watch it here:
Charles Schwab CEO chats with CNBC about recent layoffs.