Merrill Lynch Announces Substantial Sale of U.S. ABS CDOs, Exposure Reduction of $11.1 Billion
As a result of the transactions announced today, the company expects to record a pre-tax write-down in the third quarter of 2008 of approximately $5.7 billion. This write-down is comprised of a $4.4 billion loss associated with the sale of CDOs, a $0.5 billion net loss on the termination of hedges with XL Capital Assurance and an approximately $0.8 billion maximum loss related to the potential settlement of other CDO hedges with certain monoline counterparties.
XX Sean’s note — you’ve got to be fracking kidding me. Merrill just reported earnings on the 17th, but at that time, did not disclose this $5.7 billion write-down. How is that possibly legal? Anyway, it’s another shoe dropping in financials. Maybe we should ask the gang on CNBC if financials are a good buy now.
What’s next? Well …
Goldman Sachs cuts estimate on Washington Mutual
A Goldman Sachs Group Inc. analyst cut his full-year estimate on Washington Mutual Inc. on Monday, citing the thrift’s “severe” credit challenges and expectations that the bank will remain unprofitable through 2009.
… Or …
Wachovia Falls on Downgrade, CFO Exit
Wachovia dropped nearly 10% Friday after an analyst downgrade and news its CFO was leaving. Robert Patten of Morgan Keegan slapped a sell rating on the Charlotte, N.C.-based bank following its miserable second-quarter earnings results and concern that the company might have to raise more capital.
… Or …
Fannie and Freddie: It’s Worse Than You Think
Forget everything you’ve read about how woefully undercapitalized Fannie Mae and Freddie Mac are. The situation is much worse. Unlike other companies, the two government-chartered mortgage financiers publish quarterly fair-value balance sheets showing what the real-world values of their assets and liabilities supposedly are. By this measure, both companies’ net- asset values are much lower than what the government lets them show as capital, or what the accounting rules let them report as shareholder equity.
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