Bloomberg News reports that Bank of America (NYSE: BAC) is taking a $3.3 billion charge related to writing down the value of more of its Collateralized Debt Obligations (CDOs).
When will these little unpleasant surprises stop dribbling out? Wall Street's largest banks and brokers will have to write down $130 billion, including $70 billion this year, because of the slump in subprime-related debt, Deutsche Bank AG analyst Mike Mayo said in a note yesterday. But this $130 billion is not likely to be the end of it.
These write-downs are feeding on themselves. Not only that, but institutions around the world may be holding these nasty pieces of financial engineering. And as they take their write-downs, they are setting the bar for others that have not yet bitten the bullet. This means that there's more to come -- and nobody seems to know how much more.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Bank of America securities.
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Reader Comments (Page 1 of 1)
11-13-2007 @ 2:44PM
steveinDenver said...
More writedowns!!!....So what?? Everybody knows they're coming and my guess is they're already built into the market. As far as new bad loans, you can bet your boots that steps are being quickly taken at all levels to make new money available to distressed borrowers. The fed is even proposing a guaranteed mortgage instrument for "jumbo " loans (WSJ 11/9/07). Just like every other "financial disaster" that has occurred, it happens, corrections are made, and people get back to functioning. Most of these more modern "disasters" only last a year or 2. I think as much because people don't have the patience for them that they used to. We're all used to getting our needs met.
11-13-2007 @ 5:11PM
Tom said...
A billion now...then another billion...It won't seem like so much if they dribble it out. Much more to come....
11-13-2007 @ 5:16PM
Mort said...
One thing you can be sure of...The people (banks and mortgage companies) who created schemes will be hurt the least and the Wall Street money boys will put the best look on it that they can for "the good of society."
11-13-2007 @ 5:20PM
Harry said...
Abolutely...just print more money. Who cares about inflation or the value of the dollar? No wonder China and othernations are seriously looking at investing in currencies other than the dollar. Pretty soon we will be able to use the dollar as play money...
11-13-2007 @ 5:25PM
Bob said...
Go get'em Peter! You are right on target!
11-13-2007 @ 11:52PM
Robert Tice said...
Just another way to steal from the little guys, who will have to dump stocks at low prices and than the big guys gobble them up a cut-rates. It's not the first time, is it?
Okay, now, one more time...altogether now...1, 2, 3...
11-14-2007 @ 7:45AM
sid said...
Bank of America inflated their residential appraisal values and are now paying the price. Their in house company, Home Focus Valluations, utilized basicly anybody that would provide the predetermined value.
Bear Stearns (http://www.bearsterns.com) and Appraisals 24/7 (http://www.appraisals24-7.com) recently concluded that 49% of all appraisals completed by BOA, were inflated by an average of 22%.