Merrill Shocker: B&C/CDO Hits Total $7.9B

Wall Street giant Merrill Lynch & Co. took a stunning $7.9 billion writedown on subprime and collateralized debt obligation assets in the third quarter -- 75% more than it forecast just a few weeks ago.Announcing its earnings before the market opened on Wednesday, Merrill -- at one time a major financer of subprime mortgage firms -- hinted that more writedowns are to come. "We expect market conditions for subprime mortgage-related assets to continue to be uncertain, and we are working to resolve the remaining impact from our positions," said company chairman and chief executive Stan O'Neal. Even though Merrill took $7.9 billion in mortgage/CDO writedowns, its overall loss for the quarter was a more modest -- but still awful -- $2.3 billion. Merrill said its fixed-income (mortgage) revenues were a negative-$5.6 billion in the quarter. This includes trading positions, warehouse lines, and other businesses tied to the asset-backed market. In February National Mortgage News broke the news that Merrill was conducting margin calls on several nondepository subprime clients, eventually driving some of those mortgage firms into bankruptcy. Merrill Lynch can be found online at http://www.ml.com.