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Banks Morgue: The Losses Are Rolling In, But `The Tsunami Hasn't Hit the Shore Yet'

Oct. 5, 2007 (EIRNS)—Merrill Lynch announced it will report a quarterly loss, after writing off $5 billion in mortgages, mortgage backed securities (MBS) and collateralized debt obligations (CDO). This compares with a UBS write-off of $3.4 billion, and Citibank of almost $6 billion, announced earlier this week.

Washington Mutual, the largest U.S. savings and loan bank, wrote off $1.39 billion.

With more than 100 mortgage companies closed or sold off this year, Bloomberg quotes Mark Adelson, a mortgage consultant in New York City, saying that the trouble in mortgages has just begun. "The alarm is going off from the detector on the ocean floor, but the tsunami hasn't hit the shore yet."

The leveraged buyout market collapse is also rolling ahead: Barclays withdrew its bid for ABN Amro—leaving it to Royal Bank of Scotland and Bank Santander, whose joint bid of 70 billion euros, 93% of it in cash, may be a wee bit trickier to come up with than originally planned.

KKR, meanwhile, claims it will begin selling loans to finance its $32 billion buyout of the Texas energy utility TXU next week, sources told Bloomberg. KKR says it sold $9.4 billion last week to cover a part of their First Data buyout, but still have $3 billion in loans and $9 billion in bonds to sell for that deal.