City jobs on line as Bank of America takes axe to 35,000

The news came as Jim Rogers, one of the best-known investors on Wall Street, said most of the largest US banks were "totally bankrupt".

The cuts represent 11% of the combined workforce of 308,000, and could hit 1000 bankers in the City and Canary Wharf.

Bank of America has around 2000 staff at its European headquarters in Docklands while Merrill has 6000 people in London. Bank of America blamed "the weak economic environment, which is affecting the level of business activity".

It hopes the cuts will save it $7 billion (£4.7 billion) a year following the $50 billion takeover of Merrill that was agreed as the banking crisis escalated in September.

Merrill, which has 61,000 staff worldwide to Bank of America's 247,000, was forced to find a stronger partner after racking up billions of dollars of losses through bad debts linked to the US housing market.

The rescue by Bank of America came on the same weekend that rival investment bank Lehman Brothers collapsed as the financial world went into meltdown. It marked a spectacular fall from grace for Merrill, one of Wall Street's most famous names, nicknamed the Thundering Herd.

Global financial companies have already announced more than 250,000 job cuts this year with some estimates suggesting 100,000 or more could go in London alone before the crisis is over.

Bank of America is considered one of America's healthier banks, and the scale of the job cuts underlines how hard-pressed the industry is and the breadth of the redundancies hitting the US and other Western economies.

However, analysts were not surprised, having seen Citigroup recently unveil plans to eliminate 52,000 jobs or 15% of its workforce by early 2009.

"If you asked me six months ago, I would be surprised, but in this day and age, it doesn't look as draconian, especially compared with what Citigroup did," said Howard Diamond, chief executive of New Jersey headhunter Diamond Consultants.

Bank of America and Merrill have, with their rivals, axed thousands of investment banking jobs in the past year in a bid to lower costs in the face of increasing defaults in mortgages, credit-card debt and other loans. Analysts warned there could be further job cuts at Bank of America if it continues to make losses.

Legendary US investor Rogers, who founded the Quantum Fund with George Soros, said that without ill-deserved cash infusions from the White House $700 billion bailout, many American banks would be bust.

"Without giving specific names, most of the significant American banks, the larger banks, are bankrupt, totally bankrupt," he said.

"What is outrageous economically and is outrageous morally is that normally in times like this, people who are competent and who saw it coming and who kept their powder dry go and take over the assets from the incompetent.

"What's happening this time is that the government is taking the assets from the competent people and giving them to the incompetent people and saying, now you can compete with the competent people. It is horrible economics."