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Published on March 27, 2008

Wall Street banks, brokerages and hedge funds may report $460 billion in credit losses from the collapse of the sub-prime mortgage market, or almost four times the amount already disclosed, said the group.

Other analysts say profits will continue to wane.

"There is light at the end of the tunnel, but it is still rather dim," Goldman analysts said in a note to investors released recently.

They estimate residential mortgage losses will account for half the total and commercial mortgages for as much as 20 per cent.

Earnings and share prices at US financial institutions tumbled in the past year as fallout from the mortgage crisis spread to other markets. Demand for mortgage-backed securities evaporated, leading to the collapse of Bear Stearns, once that market's largest underwriter, and a Federal Reserve-led bail-out by JP Morgan Chase earlier this month.

Goldman's own share-price estimate was cut 3.7 per cent to $210 at Fox-Pitt Kelton Cochran Caronia Waller.

Despite the turmoil and damage in the overall financial community, Bear Stearns brokers are still able to keep their bonuses unchanged.

JP Morgan Chase, the third-largest US bank, will pay brokers at Bear Stearns a maximum bonus of 100 per cent of the annual revenue they generated, in order to keep them from leaving as the two companies combine.

Brokers bringing in more than $500,000 a year will receive about three-quarters of their totals up front and the rest in stock of the New York-based bank, said JP Morgan spokesman Darin Oduyoye. For those between $250,000 and $500,000, the offer is 25-per-cent cash plus 25-per-cent stock. Brokers with revenue under $250,000 will not be offered a bonus. The retention packages may prompt some of Bear Stearns' top performers to join rivals like Morgan Stanley or Merrill Lynch, where they can receive signing bonuses twice as high as JP Morgan is offering, said Mindy Diamond, president of executive-search firm Diamond Consultants.

"I think the million-dollar-plus brokers were hoping for something closer to 200 per cent," Diamond said. 

The Nation