Top 5 American subprime write-downs

Risk- Mortgaged houseThe subprime loan scandal is far from over, in the United States. In fact, the toll keeps rising as these line are written.

We’re talking about big name lenders who lost big on very shaky loans to individuals who were so tight in their budget (assuming they held one) that they got caught up in way too much debt, the instant the American economy hit a speed bump (in this case, most notably, a raise in the interest rates).

So here’s the top 5 list of (the estimated) write-downs on structured products, which include collateralized debt and loan obligations as well as asset and mortgage-backed securities (although leveraged loans aren’t included):

  1. Citigroup • 9,8B$ — It’s a low estimate since Citigroup has stated that the figure could rise another 3B$ higher;
  2. Merrill Lynch • 7,9B$ — Analysts are projecting for another 2B$ in write-downs, this quarter;
  3. UBS • 4,4B$ — They still have roughly 40B$ in CDOs and mortgage-backed securities on their books;
  4. Morgan Stanley • 3,7B$ — The total subprime exposure after write-downs could reach 6B$;
  5. Wachovia • 1,0B$ — Was one of the year’s top subprime mortgage CDO issuers, this year.

Further down the list, you can find (in order) Credit Suisse, Lehman Brothers, Bank of America, BearStearns and J.P. Morgan Chase.

Foreclosure - Mortgaged houseSome analysts say greed alone made the subprime market grow, derail and later, explode. While this might be true, at least in part, the subprime debacle is basically all about risk and reward trumping fundamental values that just went flying out the window when the easy money mirage swept Wall Street off its feet.

Probably the biggest tragedy in the subprime fiasco is the fact that the mainstream media has offered very little coverage of the millions upon millions of families and individuals who lost their homes and their trust in “the money system”.

Even if the write-downs are huge for the banks, the real drama happens at street level, with ordinary American citizens just trying to build up their dream, usually through a nice house where they could raise their family.

The subprime mess is a grim reminder of the importance of placing true value on top of any purchase decision’s criterias, especially when “losing everything” isn’t an option.

You may want to revisit this post in a year from now and compare the numbers to see who lost the most in this subprime financial storm.

Tags: subprime, cdo, mortgages, loans, money, banks, rates, finance

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