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:
Molinaro said tightening of the mortgage market will likely continue into 2008, as the conversion of pools of mortgages into bonds has essentially "come to a grinding halt." Molinaro anticipates 2008 volume will decline further, and be even more focused on traditional, prime mortgages than it is today. He said Bear Stearns has cut about 600 of the 1,000 jobs at its lending unit since the peak of the market.
The amount of the write down being asserted here is certainly far less than Merrill Lynch or Morgan Stanley, both of whom have warned recently about likely writedowns well exceeding the $1.2 billion put out there today by Bear Stearns. Time will tell, of course, if Molinaro's math proves to be accurate or not -- but Bear Stearns certainly got a bounce from the news, closing Wednesday at $103.27, up 2.38 percent. Shares continued upward in after-hours trading to $103.60.