More Subprime Pain in Store

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After racking up more than $100 billion in mortgage-related losses in recent months, banks and their investors had hoped they were out of the woods. They aren’t, the Wall Street Journal reports.


UBS AG’s warning yesterday that its 2007 write-downs would be $4 billion higher than it predicted last month signaled that further pain may lie ahead for Wall Street banks still vulnerable to the U.S. housing sector’s strife.


Meanwhile, tough times for bond insurers such as MBIA Inc. and Ambac Financial Group Inc. may spell trouble for banks that rely on those firms to insulate their mortgage holdings from losing value.


Those concerns were in the spotlight yesterday as Oppenheimer & Co analyst Meredith Whitney warned that Wall Street faces at least $40 billion in losses if the insurers see their credit ratings cut or file for bankruptcy protection.


“When it becomes clear [as we think it will] that more charges are on the horizon, we believe the market will take another turn for the worse,” Ms. Whitney wrote.


Fueling the concerns, Standard & Poor’s predicted yesterday that the carnage might spread to a wider range of financial institutions, with total losses potentially exceeding $265 billion.



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