Wednesday, November 14, 2007

A Few Billion Here… A Few Billion There…

…And pretty soon you hit some serious write-downs. Today Bear Stearns announced they would write-off another 1.2 billion dollars in the fourth quarter. Yesterday Bank of America announced a write-down of 3 billion of mortgage-related investments and spent $600 million to prop up its money market funds. HSBC said it would write-down $3.4 billion in bad loans.

The total of write-offs at the large banks has now gone over the $50 billion mark, and this is just the beginning. Many industry watchers believe the world-wide bank losses will exceed $500B. Soon it will be a question if the capital structure of some of these institutions can handle the losses.

A number of banks such as Goldman Sachs have stubbornly refused to take write-downs, smugly secure with the notion that the credit crunch will pass. Recent announcements indicate that the firm has piled into a short position in housing debt to offset the loss on the price of other assets. Despite CreditSights and other firms estimating Goldman needs to take $5 billion in charges, the firm is still sticking by its line that it will have no significant write-offs.

With some banking firms taking a continual stream of write-downs and others with their heads apparently stuck in the ground, is it time to start a bank “death-watch” pool?

BOFA’s Turn: $3B Write-Down

Goldman's CEO sees no big write-down