Already, an estimated 150,000 jobs have been lost by the financial sector worldwide, and more are expected in investment banking and trading. Banks and brokers are not only struggling to recover from huge write-downs of mortgages and other assets but are also facing a collapse in deal and financing activity.

But tens of thousands of analysts, who work in research departments that had already shrunk as government probes after the technology stocks’ crash in 2000-2001 led to the forced separation of research from investment banking, are again on the chopping block.

“There’s wicked consolidation occurring and, in the process, a lot of analyst jobs are getting cut — and not coming back,” said Jim Bianco, president of independent firm Bianco Research in Chicago, which tracks and analyzes macro economic and market trends.

It all means that some major companies may not be covered by as many of the big banks, and many more medium and small-sized companies will lose coverage altogether. That can really hurt the entrepreneurial edges of Corporate America as without the exposure that analyst coverage brings, it can be more difficult for smaller companies to attract investment.

In the past, analysts could be revenue earners for banks and brokers, helping their investment bankers sell deals to investors.

But following reforms forced on the banks by then New York Attorney General Eliot Spitzer after a tainted research scandal during the dot-com boom and bust, they can no longer work hand in hand with the bankers as research analysts and depend on investment banking work for their own bonuses.

And that means they are now seen largely as costs that can be slashed when times get hard. The rapidly deteriorating condition of the U.S. and global economies and the impact of the financial crisis on bank income have made matters all the worse.

“These research positions won’t come back in 2009 and possibly 2010,” added Lawrence McDonald, formerly vice president of distressed convertible trading at Lehman Brothers, who left the New York-based firm this March before its bankruptcy in September.

“The duplication of analysts between the different divisions at investment houses is profound,” McDonald said.

Even venerable Goldman Sachs Group, the largest investment bank known to avoid sizeable losses from mortgages and corporate loans, is cutting almost 3,300 jobs, including some equity analysts. The casualties included William Tanona, the firm’s financial services analyst, who covered companies such as JPMorgan Chase & Co. and Morgan Stanley.

“The sell side cannot justify the cost of fundamental research,” said Tom Sowanick, the chief investment officer for US$22 billion in assets at Clearbrook Financial LLC, in Princeton, New Jersey.

In September, the Federal Reserve allowed Goldman Sachs and Morgan Stanley to become bank holding companies. The investment banks will now be regulated like commercial banks, limiting the amount they can borrow against their assets.

In other words, they will not be able to leverage and bet the way they used to, Sowanick added.

“Without that business, it will put a big hole in these firms,” he said.

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