An analyst at Goldman Sachs cut his full-year earnings estimate for Merrill Lynch by 25 percent on the expectation that the third-largest Wall Street investment bank may record up to $4 billion in mortgage and related losses. From Bloomberg:

[Goldman Sachs analyst William] Tanona cut his third-quarter earnings estimate to 15 cents a share from $1.95. For the full year, he expects earnings of $6.75 a share, or 25 percent less than his previous prediction … The losses would exceed those reported last week by Goldman, Morgan Stanley, Lehman Brothers Holdings Inc. and Bear Stearns Cos. New York-based Merrill may have to write down the value of mortgages, corporate loans and collateralized debt obligations, Tanona wrote in a report to clients today. Merrill “appears to be caught in the crosshairs,” Tanona said.

I don’t think those crosshairs are focused just on Merrill, although I think the write-down estimate is high on the OQ (that would be the Overreaction Quotient — I just made it up). Third quarter write-downs appear as if they could be the story of the third quarter earnings season; there has even been speculation of multi-million mortgage write-downs at Countrywide Financial recently.