Banks' credit-crisis write-downs top the half-trillion mark

Now $500 billion -- and counting.

That’s Bloomberg’s tally of the credit write-downs that investment banks and commercial banks worldwide have taken since the subprime mortgage debacle began to unfold early in 2007.

The total reached $501 billion today after Swiss financial giant UBS said it wrote off another $5.1 billion tied to U.S. mortgage-backed securities and $900 million to cover its buyback of so-called auction-rate debt securities held by clients.

Bloomberg’s tally includes losses the banks have recorded on their subprime-related bond holdings and on other securities that have been marked down in value as the credit crisis has deepened.

The total of write-downs has ballooned from $218 billion just since the end of last year. Citigroup Inc. ranks No. 1 with accumulated write-downs, at $55.1 billion, according to Bloomberg. Merrill Lynch & Co. is No. 2, with $51.8 billion. UBS is third with $44.2 billion.

And it doesn’t look at all like we’ve peaked. Shares of JPMorgan Chase & Co. today plunged $3.97, or 9.5%, to $37.92, after the bank said in a regulatory filing that it has racked up $1.5 billion in additional losses on mortgage-backed bonds and other securities just since June 30, as market conditions "have substantially deteriorated."

Through June 30 JPMorgan’s accumulated write-downs totaled $14.3 billion -- so it had been faring better than many of its major peers.

JPMorgan’s warning helped drag most financial stocks lower today. The financial-sector index of the Standard & Poor’s 500 index plunged 5.2%, its steepest loss since it dropped 6.7% on July 24. The Dow Jones industrial average dropped 139.88 points, or 1.2%, to 11,642.47.

Comments

[masterpuff theater]

If you rob a bank, you go to jail. If you work at a bank, and lose billions of dollars of other peoples money, you get a nice severance package. the lesson here, Its pretty clear....if you're going top be a thief, think Big.

[NV]

easy come, easy go !
too bad all those performance based bonuses stay with the thieves.
can we do anything about that ...

[Kim Kelly]

And whose fault is all this anyway? Mozillo at Countrywide? All the financial institutions? Where are our consumer laws and what political party (need I ask) allowed the banks to get away with this for so long? If we don't regulate banks and insurance companies more closely, they will simply steal our money and give us absolutely nothing in return.

[martscan]

I suppose its human nature to vent, to get some personal satisfaction by placing blame on someone, a group or an organization, when things go badly for a great many people. As the owner of thousands of shares of IMB stock, worth about seven cents a share, I think I'm entitled to gripe with the best of them. However, I can't do anything about it and griping gets me nowhere, save perhaps lowering my blood pressure. I can though, as Kipling so beautifully put it, keep my head about me... and make the best of a bad situation. Ergo, I'm buying financials.

During a similarly lousy period for bank stocks, between 1988 and 1993, banks' chargeoffs and loan loss provisions kept rising from 1988 and did not peak until 1991, then steadily declined through 1993. However, bank stock prices bottomed out, hit their trough, a full year before the writeoffs peaked...and by the time the chargeoffs peaked, the recovery in stock prices was fully half over and prices had doubled. Its difficult to buck trends, defy current news and pull the trigger, without confirmation of an ending crisis and light at the end of the tunnel. In this scenario, I think the light at the end of the tunnel is the train pulling out of the station...and I'm going to be on it.

[Millionaire says Greed is GO0D]

When my houses went up in value, I borrowed against my mortagages to their max and put the money in safe deposit. When the value of my houses fell by more than 20%, I sent the keys back to the bank and walked away - debt free. You too could have been a millionaire!

[whs806]

The cost of the subprime mess will be paid for by the taxpayer, not those responsible for the mess. Print money, FED, rescue those irresponsible lending institutions and homebuyers with poor credit. Drive the dollar lower and prolong the recovery by letting taxpayers bailout the irresponsible.

Be sure to enable the irresponsible to continue with their irresponsible ways!

[anon]

"When my houses went up in value, I borrowed against my mortagages to their max and put the money in safe deposit. When the value of my houses fell by more than 20%, I sent the keys back to the bank and walked away - debt free. You too could have been a millionaire!"

This is by far the most interesting comment I've read anywhere for a long time. Is it for real? Could this strategy have worked in a non-recourse state like CA?

[jiminfresno]

I believe any refinance loans are recourse loans, accordingly the Bank can
go against the borrower. Only original money purchase mortgages secured by the original purchase of the home are non recourse.

[James Monachino]

"Now $500 billion -- and counting" Yes, the buck doesn't stop here.

Additional points of Considerations:
* Majority of the problem loans are highly illiquid.
* Pricing: In most cases is an educated guess base on what traders were pricing off of 2-3 months ago. (Some case even longer depending on who was pricing it.)
* Market conditions: are still shifting and valuations are unstable - - including the spread pricing variables that are being used in the pricing models.
* Try to determine the accounting of the problem loans: Is it being treated as an on balance or off balance sheet transaction.
* Lehman Brothers and Others: are trying to determine real prices through sales of their troubled products. In most cases, estimated pricing was no where near actual market price.

Until the underlining mortgage assets stabilize, any talk of a turn around is premature. In addition, recover will not have a v bottom pattern but more along the lines of a long saucer shape.

Message: Keep your powder dry, this could last alot longer than we think.

James Monachino