Another Reason to Stay Worried About the Subprime Mess

Merrill Lynch taking a big hit for bad loans. From the New York Times:

Merrill, the nation’s largest brokerage firm, is expected to disclose the huge write-down when it reports earnings next week, according to people who have been briefed on its plans. The loss far exceeds the $12 billion hit many Wall Street analysts had forecast.

Not good. Not good at all.

He estimates that Merrill will write down its $27 billion of combined collateralized debt obligation and subprime-related exposures by $10 billion and report a loss of $5.10 a share for the fourth quarter. Any write-down above $20 billion, he said, would “significantly increase leverage and would threaten the credit ratings of the firm.”