Wall Street's titans made a terrible mess with their bets on the sub-prime mortgage market, and now they're paying for it dearly. Most of the major U.S. banks and brokerage firms recorded massive write-downs of sub-prime and CDO (collateralized debt obligation) assets in the third quarter after late payments on U.S. home loans hit a five-year high. More big write-downs are expected in the fourth quarter of this year, as well as next year. One analyst, Matt King of Citigroup, estimates that mortgage-related write-downs could total as much as $64 billion for the second half of this year when the all dust has cleared. The numbers are a little slippery, as some firms revised their reports and estimates for future write-downs several times; some analyst reports on the figures conflict. See the table below to get a sense of the damage.
|Firm||Net CDO and sub-prime exposure at end of Q3*||Q3 pre-tax credit write-downs||Est. Q4 pre-tax credit write-downs**|
|Citigroup||$54.9 bn||$6.4 bn||$11.0 bn|
|UBS||38.8 bn||3.8 bn||7.1 bn|
|Merrill Lynch||20.9 bn||8.4 bn||10.0 bn|
|Morgan Stanley||10.4 bn||1.4 bn||3.7 bn|
|Wachovia||3.9 bn||1.3 bn||1.1 bn|
|Bear Stearns||3.2 bn||700.0 mn||1.2 bn|
|Goldman Sachs||N/A||1.5 bn||0|
| *Firm filings and Keefe Bruyette & Woods analyst report |
**UBS source: Lehman Brothers report; Merrill Lynch source: Deutsche Bank report; Citigroup source: Citigroup; Bear Stearns source: Bear Stearns; Morgan Stanley, Goldman Sachs and Wachovia source: CIBC World Markets report.