- European Commission Objects to Sun Micro-Oracle Deal
- Obama Says Will Raise Currency Issue with China
- Can Apple Top Microsoft as Most Valuable Tech Firm?
- Buffett to Sell Stakes in Norfolk Southern, Union Pacific
- Cramer: 5 Stocks to Play the Next Bull Run
- Do You Know Your Coca-Cola Myths?
- Electronic Arts Beats Street, Announces 1,500 Job Cuts
- Time Is Here to Look at Overseas Stocks: Bill Gross
- Home Prices Start to Stabilize In the US as Sales Pick Up
- Why Google is Paying $750 Million for Ad Mob
- Warren Buffett to Sell Stakes In Union Pacific & Norfolk Southern
- Nov. 9: Unusual Volume Leaders
- The Battered Businesses Behind Housing
- Modern Warfare 2's Record-Breaking Launch
- Merck’s Mega-Monday Morning
- Why are Traders Bullish on This Food Company?
- Profiting From Natural Gas: Strategists
- S&P Stocks Trading at New 52-Week Highs
MOST SHARED
- Future of Marketing
- Oil Tomorrow
- Dow Up Over 100 After G20 Stimulus Pledge
- Obama Says Will Raise Currency Issue with China
- Priceline Crushes Profit Forecasts; Shares Jump
- Can Apple Top Microsoft as Most Valuable Tech Firm?
- Maria's Market Message
- A Year on, China's Stimulus Postpones its Problems
- Trial of Ex-Bear Stearns Managers Goes to Jury
Text Size 
Total losses stemming from writing down the value of mortgage-linked securities could be
as high as $200 billion, with financial institutions sitting on at least $60 billion in losses that have not yet been disclosed, JPMorgan said Monday.
Banks and insurers, including Merrill Lynch, Ambac Financial Group and MBIA have reported
third-quarter losses as they write down the value of securities, including collateralized debt obligations, or CDOs, backed by residential mortgages.
There is much more to come, JPMorgan analyst Chistopher Flanagan said on a conference call with clients.
Based on the pricing of key derivative indexes tied to residential mortgages, known as the ABX indexes, there are $200 billion in losses related to looming defaults by residential and commercial mortgage borrowers, and only $30 billion to $40 billion has thus far been recognized in financial reporting, he said.
Not all losses will be at financial companies, and "banks, brokers, mortgage and monoline insurers will bear the brunt of this loss recognition," he said.
At least $100 billion of losses likely reside at financial companies, which leaves $60 billion to $70 billion unaccounted for, he said.
"The implications of this expectation are obviously somewhat staggering, if not tough to comprehend, which is why we think denial of the reality of it remains so persistent,"
Flanagan said.
Companies have been writing down the value of CDOs backed by mortgages based on pricing that is more favorable than that of the ABX indexes, but Flanagan said the ABX prices are more
accurate.
The ABX indexes have sold off persistently, with the "AAA" rated index backed by loans made in the second half of 2006 dropping to around 82 cents on the dollar, from above par in
January. At the same time, the "BBB-minus"-rated index has plunged to 18 cents on the dollar, from 97 cents at the beginning of the year.
"We continue to think that as losses are recognized, it will broaden into a consumer-focused credit crunch, that in turn will cause consumer credit to deteriorate," Flanagan said.
Print
Email
- Do free market libertarians really believe what they say about ethics and shareholder value? The Big Money takes a look.
- Cramer did the research and found eight stocks that lead the pack. Read on to get his top picks.
- On the anniversary of the fall of the Berlin Wall, many in the former Eastern Bloc recall communism fondly.
- Software, biotech firms, even banks are watching a particular Supreme Court argument today.
- From politicians to CEOs to companies, here's your chance to vote for the winners and losers of 2009.
- A new sinister Internet viruses can turn you into an unsuspecting collector of child pornography.
Data is a real-time snapshot *Data is delayed at least 15 minutes