Merrill Lynch is to announce its third-quarter earnings today, and the prognosis is bleak: insiders are expecting the bank to report $2.5 billion in additional losses. That's over and above the $5 billion Merrill already reported earlier this month. Today's announcement of greater losses raises even more questions about chief executive E. Stanley O'Neal, whose tenure has seen Merrill take on riskier investments.
Most of the write-offs are the result of devaluing collateralized debt obligations, whose worth has plummeted as the credit crisis wears on. But the subprime fallout is not Merrill's only ill. O'Neal also pushed the bank into fixed-income markets with chaotic results. Several top executives bailed or were fired. The earlier admission of losses was embarrassing enough; today's might spell trouble for the CEO.