Mortgage Mayhem ScorecardMortgage Mayhem Scorecard
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
December 1, 2007
Kristen French
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. | |||
