Merrill Lynch & Co. -- which took $7.9 billion of writedowns on subprime and collateralized debt obligation assets in the third quarter -- may take an additional $10 billion in charges in the fourth quarter, according to a new research report issued by Sandler O'Neill.Sandler's estimate comes two days after Merrill sold a "passive" stake in itself to Temasek Holdings, a Singapore company, and Davis Selected Advisors, New York, for $6.2 billion. On Christmas Eve, Merrill sold most of its commercial finance operation to GE Capital for an undisclosed price. The sale, however, will free up about $1.3 billion in capital. The commercial unit is not involved in commercial mortgage lending. In its research report, Sandler called Merrill's equity sale a "necessary evil," noting that "we updated our expected CDO and subprime marks to $10 billion from $3.5 billion and estimated that [Merrill's] tangible equity ratio could fall to an uncomfortably low 2.2%."

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