They take their licks though. I was there when the LTCM fund collapsed and they lost $600M. Also when the Russian economy collapsed and they lost another $600M. Layoffs? Nah - business as usual.
The finance industry doesn't need as many layoffs as other industries because they solved the stick wage problem.
It's easy to raise wages when times are good, but it's hard to drop wages when times are bad, because it results in the whole office getting demoralized and productivity dropping. So companies will resort to laying people off entirely when revenues drop, because the morale hit from cutting people off entirely is less than the morale hit from dropping everyone's salary.
Finance presumably solves this by paying out the majority of compensation in bonuses, which are explicitly tied to the firm's performance. If the company does well, you do well, if the company does poorly, you knew ahead of time that you'd be taking a haircut, so it doesn't feel as much like a broken promise as when wages are cut.
They're not completely immune from layoffs though - when a firm goes under entirely, most of the employee base is let go by the acquirer. And financial firms tend to blow up completely more than other types of firms, because they operate with more leverage. That's why luxury businesses in NYC took a big hit this financial crisis.
This is exactly right. Relative to 2007, my friend's 2008 income fell 40%. In 2009 it was 50% higher than 2007. Layoffs are less likely when wages are flexible.
The finance industry doesn't need as many layoffs as other industries because they solved the stick wage problem.