Saturday, October 13, 2007

Banks show shakey third quarter losses

Investment bank Merrill Lynch said credit and mortgage woes will lead to it post a third-quarter loss, as it takes almost $5 billion in writedowns in the wake of a credit crunch that paralyzed Wall Street this summer.

And Merrill Lynch was not by any means the only institution to announce its earnings would take a significant hit due to the declining mortgage market. Washington Mutual Inc. said its third-quarter earnings would tumble 75 percent on loan write downs and substantially higher provisions for loan losses.

Citigroup said its quarterly earnings would fall 60 percent, as it planned to write down more than $3 billion in securities backed by underperforming mortgages and loans tied to corporate bonds.

JPMorgan Chase and Bank of America are expected to disclose losses of about $3 billion in mortgage securities and leveraged loans when they report earnings this month, the Financial Times reported, citing an analyst.

Meanwhile, data from the U.S. Department of Housing and Urban Development suggests there about 750,000 homeless across the U.S. on any given night, with about 40 percent of those members of homeless families.

The cause: A convergence of low wages, high housing costs, an increase in housing foreclosures and cuts in federal and state housing assistance programs. One official explains: "I think what we are seeing here is a perfect storm.”

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