![]()
- US Job Losses to Bottom out Next Quarter: NABE
- Late Payments on Credit Cards Drop in Third Quarter
- Smallest US Businesses Borrowing Again: PayNet
- Little Sign of Inflation on the Horizon: IMF
- Kraft Weighs Higher Cadbury Bid as Rivals Circle
- MBS Program Should be Extended: Fed's Bullard
- JPMorgan's Dimon Could Succeed Geithner: Report
- Wall Street Finds Profits by Reducing Mortgages
- Microsoft, News Corp Weigh Online News Pact
- CNBC VIDEO: Warren Buffett & Bill Gates 'Walk & Talk' at Columbia University
- U.S. Stocks Slip, Dollar Rises
- How Stock Investors Can Play Holiday Travel
- Time Lapse World Series Is A Great Play
- Hirschhorn: Greed...or Fear
- My Top 10 Tech Toys for the Holidays
- iPhone a Better Gaming Platform Than Android?
- May Day For Dendreon
- 100% Mortgage Financing From USDA
MOST SHARED
- Wall Street Finds Profits by Reducing Mortgages
- CNBC VIDEO: Warren Buffett & Bill Gates 'Walk & Talk' at Columbia University
- What if a Recovery Is All in Your Head?
- Kraft Weighs Higher Cadbury Bid as Rivals Circle
- China Should Stop Property Stimulus Now: Central Bank
- China Wind Power Reportedly Seeking $2.2 Billion in IPO
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.
- Technology can make or break a fortune in the world of alternative energy.
- Warren Buffett and Bill Gates discuss the economy and other subjects with CNBC's Becky Quick.
- Many people are facing the holidays with substantially smaller incomes. Here’s how some are adapting.
- The Victoria's Secret Fashion Show attracts a big TV audience every year, but this year it may take on even more importance.
- Jim Cramer is a proponent of stocks that pay healthy dividends, and here are his top five dividend plays.
- CNBC’s technology reporter Jim Goldman guides you through the best gadgets to buy this holiday season.











