Daniel Gross Suggests Banks Can Hire Their Way Out Of Crisis. Here’s Why He’s Wrong.

Yahoo Finance economics editor Daniel Gross, who was a Newsweek/Slate financial columnist until last month, wrote a succinct summary of the foreclosure crisis yesterday. But that wasn’t his hook. The hook was how big banks can alleviate both the jobless and foreclosure crisis by hiring 50,000 workers at $50,000/year each to deal with foreclosures (excerpt below).

It’s a respectable idea but anyone who’s worked for a big bank knows there’s already so much low-level fat in those organizations, new workers of that magnitude would never get trained or properly directed to their roles in time to alter the foreclosure market inevitabilities. And banks are too focused on trying to profit their way out of this mess by hiring for new loan production, and cherry picking healthy assets (loan portfolios) and deposits (branches) from failing banks. Newly acquired assets and deposits come with plenty of employees to sort through which means productivity of lower and mid-level people gets lost in the integration mosh pits. So intelligent planning on modifying existing loans gets sidelined.

[Big banks] should call a press conference today and announce their intention to hired 50,000 people to deal with all aspects of the foreclosure crisis. They should hire processors who will actually read the legal documents, but also professionals to work on debtor counseling and modification, landscapers to mow loans of real estate they own, and security guards who will ensure that repossessed homes aren’t stripped or occupied by squatters.

Doing so would help put a small chunk of the underemployed workforce back on the job. It would be a bold, public gesture that might spur other companies to hire. It would demonstrate to courts and politicians that the banks are finally getting serious about getting on top of the problem. Perhaps some of the newly employed will use their wages to stay current on their mortgages, and the banks can certainly afford it. Fifty thousand people at $50,000 per year comes to $2.5 billion. J.P. Morgan Chase earned $4.8 billion in the second quarter. In other words, it would cost the industry about what one of its leading members makes in seven weeks.