Moody's Investors Service on Thursday downgraded the long term ratings of Bear Stearns Cos. from 'A2' to 'A1,' reacting to the Wall Street bank's first-ever quarterly loss. The downgrades affected $80 billion of the company's debt securities, Moody's said.
Bear Stearns Thursday reported its first-ever quarterly loss, posting a $854 million loss for the fourth quarter as mortgage market woes led to continuing writedowns for mortgage-backed investments and a drop in fixed-income trading revenue. The Wall Street firm said it absorbed $1.9 billion in subprime-led writedowns during the quarter, net of hedges.
Washington Mutual let fly with a market bombshell Monday that seems likely to set the stage for the fourth quarter earnings season - the company said it will likely swing to a net loss in the fourth quarter as it adjusts to "unprecedented challenges in the mortgage and credit markets."
A Washington Mutual brokerage unit may be planning to exit the MBS business, according to a published report in the New York Post on Thursday. Citing insider sources, the Post says that WaMu Capital Corp. is "pulling the plug Dec. 10 on its attempt to be a player in the MBS markets."
From the story:
Impac Mortgage Holdings, Inc. said today that it will not file its third quarter earnings statement with the Securities and Exchange Commision as the former Alt-A mortgage giant grapples with a margin call from Bear Stearns and possible future margin calls from other creditors.
From the company's SEC filing:
Remarks made by Bear Stearns CFO Samuel Molinaro Wednesday confirmed that the investment bank will be making a billion dollar write-down of its subprime-related holdings, including CDOs and RMBS. Molinaro told attendees at a Merrill Lynch Banking and Finance Conference in New York that Bear Stearns has written off approximately $1.2 billion so far in the fourth quarter, with more possible as the rest of 2007 finishes out.
The Associated Press reports:
The lawsuit that's got everyone buzzing in the industry -- that would be NY AG Andrew Cuomo's allegation that First American unit eAppraiseIT caved to pressure from WaMu and inflated appraisals -- could have some serious repercussions for Washington Mutual should Cuomo succeed, according to a story on MarketWatch
Probably the biggest news item this Friday is a press release put out by New York AG Andrew Cuomo's office, which said it has sued First American and subsidiary eAppraiseIT for conspiring with Washington Mutual to inflate appraisals.
The press release reads like an episode of your favorite TV drama - some excerpts:
A report in the Financial Times finds that analysts are projecting $3 billion in write-downs between leveraged loans and mortgage-related losses at JPMorgan and Bank of America. Both are the two largest banks (investment and otherwise) that have yet to visit what many have taken to calling the "confessional" for the third quarter earnings period.
Reuters reports:
Two mortgage-related funds that collapsed at Bear Stearns earlier this year amid the intial subprime credit meltdown are now the subject of a criminal investigation, the Wall Street Journal reported today.
From the story:
The U.S. attorney in Brooklyn has made a request to Bear Stearns for information related to the hedge funds, whose failure cost investors $1.6 billion, said these people. The probe is in the early stages, the people added, and has not generated subpoenas.
