Wells to Shed Its Economic Research Staff

Wells Fargo & Co. will eliminate its entire economics research department as of April 1, the effective date of its merger with First Interstate Bancorp, The Times has learned.

The action involves the firing of such well-known and often-quoted experts on the California economy as Joseph Wahed, chief economist at Wells, and Lynn Reaser, his counterpart at First Interstate.

Such moves have become increasingly common in corporate America as economists have found themselves as vulnerable to “downsizing” as other white-collar employees. However, the elimination of a bank’s entire economics research staff is highly unusual.

Neither Wells Fargo nor First Interstate would comment on the shutdown. The economists learned of the move last week but it had not yet been disclosed publicly. Reaser declined to comment and Wahed could not be reached.

Wells decided it can do without the department because its bankers have come to rely on outside sources--Stanford University and UCLA, for example--for economic projections and other information, according to sources familiar with the situation.

The economists and support staff--perhaps 20 people in all--will join up to 10,000 bank employees to be laid off after the $12.6-billion merger, the biggest in U.S. banking history.

It is unknown how much money Wells expects to save by eliminating the economics research department, but the bank has said it expects to trim total costs by up to $700 million a year after the merger.

Many economists’ jobs have been lost after mergers, when companies decided there was no sense in having two economics departments. Increasingly, however, firms are concluding that even one department is an unaffordable luxury.

“It’s hard to measure the contribution of the economics department, as opposed to somebody selling merchandise or making loans,” said Walter Hoadley, senior research fellow at Stanford’s Hoover Institution and retired chief economist for Bank of America.

Jobs held by economists used to be more secure because they had a specialized knowledge that was considered almost magical within the corporation, Hoadley said. But nowadays, he added, “practically every CEO has an MBA degree and knows some economics or thinks he does.”

The economists who hang onto their jobs are those who are able to “attach themselves to a profit center” within the company, Hoadley said.

Wells Fargo provides an example that illustrates that observation: Gary Schlossberg, senior economist, will stay on at the bank but will work as an advisor to the money desk, sources said.

“It’s a question of what the organization thinks is valuable,” said economist Tom Lieser, associate director of the Economic Forecasting Project at UCLA. “At some companies, economists will tend to be positioned closer to the actual users of the information.”

Another factor in the shutdown of corporate economics departments nationwide has been the proliferation of private consulting firms and other sources for the kind of information that in-house economists have traditionally provided.

Hoadley warned, however, that the latest corporate trend may prove shortsighted. “Sooner or later,” he said, “somebody’s going to blow a big decision, and they may realize this was a mistake.”