Merrill Lynch to Take $15 Billion Mortgage Writedown, NYT Says

Merrill Lynch to Take $15 Billion Mortgage Writedown, NYT Says

Jan. 11 (Bloomberg) -- Merrill Lynch & Co., the third- largest U.S. securities firm, may take a $15 billion writedown related to mortgage investments, almost twice its original estimate, the New York Times reported, citing people briefed on the plan.

Merrill is trying to raise $4 billion in the coming days from investors in the U.S., Asia and the Middle East, the newspaper said, citing the same people. The firm is expected to disclose the loss when it reports earnings next week, according to the Times.

Reports of larger-than-expected writedowns may trigger more declines in financial stocks, after Merrill and Citigroup Inc. lost almost half their market value in the past year. U.S. and European banks and securities firms have turned to Asian and Middle Eastern governments for about $34 billion as subprime mortgage losses battered their balance sheets.

``I suspect there'll be more to come,'' said Hugh Young, who oversees $50 billion at Aberdeen Asset Management Asia Ltd. in Singapore. ``It's going to be a tough year for investors.''

Merrill's writedown is more than the $12 billion analysts had estimated, the newspaper said. Merrill spokeswoman Jessica Oppenheim declined to comment when contacted by Bloomberg News.

Losses on bets related to U.S. mortgages cost the job of former Merrill Chief Executive Officer Stan O'Neal in October. John Thain, the former head of NYSE Euronext, replaced him in December. That month, Merrill said it's raising as much as $6.2 billion from Singapore's Temasek Holdings Pte. and New York- based money manager Davis Selected Advisors LP.

Recession?

Soaring investments by sovereign wealth funds such as China Investment Corp. in finance companies may trigger a political backlash in the U.S. and Europe. China Investment, the nation's $200 billion wealth fund, is paying $5 billion for as much as 10 percent of Morgan Stanley.

``Because sovereign wealth funds, by definition, are potentially susceptible to non-economic interests, the closer they come to exercising control and influence, the greater concerns we have,'' said New York Senator Charles Schumer in a statement yesterday.

Addressing concerns that the housing crisis will spread to the wider U.S. economy and trigger a recession, Federal Reserve Board Chairman Ben S. Bernanke said yesterday that more interest-rate cuts ``may well be necessary.'' Bernanke said the Fed isn't forecasting a recession.

``Even if we don't see a technical recession in the U.S., it will definitely feel like one,'' said Young. ``Many of the speculative positions are being washed out very quickly.''

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