[RockinRight]

There’s a thing called “kitchen sinking” that was mentioned here on FR the other day.

These banks are writing off ALL subprime debt...even though most of these notes will be paid satisfactorily and will not be losses. There are several reasons for this...but what it means is that later on...when this does shake out they will show larger profits at that time than they otherwise would have.

[Alberta's Child]

Good point there. A financial institution that writes down all of their existing mortgage bonds to a value of 0 today could show a pretty substantial profit in the future even if only 20% of the loans in their portfolio remain solvent.

I'm still kind of surprised that the bond rating companies like Moody's and Standard & Poor's haven't been completely discredited as a result of this whole mess (since most of these CMOs filled with bad loans were rated as investment-grade bonds by those morons).