BUSINESS BRIEFS
$15B write-down at Merrill Lynch
Associated Press
NEW YORK — John Thain, presiding over his first set of earnings yesterday as the new leader of Merrill Lynch & Co., cleared the decks with some $15 billion of subprime mortgage related write-downs that led to the largest quarterly loss since the brokerage was founded 94 years ago.
And, while it was among the most aggressive moves on Wall Street to deal with bad bets on subprime mortgages, Thain's still not ready to say the worst of the credit crisis is over.
BOND INSURANCE STOCKS TAKE BIG HIT
NEW YORK — Bond insurance stocks plunged yesterday after a ratings company said Ambac Financial Group Inc.'s plan to raise cash may not be enough to save its crucial credit rating.
Ambac shares fell 51.9 percent to $6.24, while shares of chief rival MBIA Inc. fell 31.2 percent to $9.22. Smaller competitors Security Capital Assurance and ACA Capital Holdings also fell substantially. The sector's woes helped dragged the broader market sharply lower as well, with the Standard & Poor's 500 closing nearly 3 percent lower.
Moody's Investors Service said Wednesday night it is considering cutting Ambac's "AAA" financial-strength rating, which would squelch the insurer's prospects for winning new business.
NEWS GETS EVEN BETTER AT IBM
BOSTON — International Business Machines Corp. told Wall Street to raise its 2008 estimates yesterday, further boosting a stock that was already buoyed by strong fourth-quarter earnings.
IBM's chief financial officer, Mark Loughridge, said earnings would be between $8.20 and $8.30 per share in 2008. Coming into yesterday, analysts polled by Thomson Financial were expecting $7.94 per share in 2008.
Investors responded by bidding IBM shares up 5 percent to $106.20 after hours. Before the earnings report, the stock had fallen 53 cents to close at $101.10.
SAVINGS AND LOAN SUFFERS $1.87B LOSS
SEATTLE — Washington Mutual Inc., the country's biggest savings and loan, said yesterday it swung to a $1.87 billion loss in the fourth quarter, hurt badly by the sinking value of its mortgage portfolio.
The quarterly loss was $2.19 per share, compared with a profit of $1.06 billion, or $1.10 per share in the same period last year.
Results included a write-down of $1.6 billion as the value of home loans withered, which WaMu had previously disclosed.
GM LABOR COSTS WILL BE CUT FURTHER
DETROIT — General Motors Corp. plans to reduce its annual U.S. labor costs by another $5 billion by 2011, the company said yesterday.
Chairman and Chief Executive Rick Wagoner said a good chunk of the reduction will come from the new contract agreement reached last year with the United Auto Workers.
The contract shifts the obligation for about $46.7 billion in retired UAW worker healthcare from the company to the union, with the company pouring billions into a trust fund run by the union.
The trust, called a voluntary employees beneficiary association, takes over the healthcare obligation in 2010.
LEHMAN ADJUSTS ON HOUSING SLUMP
NEW YORK — Lehman Brothers Holdings Inc. yesterday said it would cease wholesale mortgage lending in the U.S. because of the continued housing slump, a move that includes 1,300 jobs cuts and a $40 million charge.
The nation's fourth-largest investment bank had set up a wholesale lending business to purchase loans made by others and then package them into bonds.
But, as the bottom dropped out of the subprime mortgage market, the business triggered steep losses for Wall Street's biggest banks.
Lehman has eliminated about 2,500 jobs already from its mortgage business, folding most of the operations into its Aurora Loan Services unit.
