Couldn’t Help But Notice (102407)

Spreading the pain:

Merrill Lynch & Co. Inc. took a $7.9 billion writedown in the third quarter due to bad mortgage bets, well exceeding its initial estimates and raising questions about the bank’s risk management.

The Wall Street firm said Wednesday it took losses on home loans given to borrowers with poor credit and collateralized debt obligations - pools of bonds sold off in slices of varying credit risk.

The hit is well above the $5 billion writedown Merrill (Charts, Fortune 500) estimated it would take just a little more than two weeks ago. The blow is likely to renew credit fears as well as raise pressure on Merrill chief executive Stanley O’Neal.

As to the bolded item, I don’t think so. What you’re seeing a correction of an imbalanced situation that is resetting the credit markets back to normalcy. The above also shows that, in addition to borrowers who made bad choices, those involved in making bad lending decisions and/or those who supported them are also paying a heavy price.

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You might think I’d be a fan of this:

A final regulation to be issued by the Labor Department on Tuesday is expected to significantly boost employee participation in 401(k) retirement plans.

The regulation clarifies how employers can invest money from workers who were automatically enrolled in the plans rather than actively signing up.

One aspect of the regulation will also give companies a green light to automatically enroll existing employees. Many employers have been unsure about whether they faced legal liability if they automatically enrolled existing, rather than just new, workers.

You would be wrong. Automatic enrollment of new employees makes sense, in that employees are making conscious choices at the time they are hired. They are told what’s about to happen, and decide to opt out.

Though existing employees will presumably get similar notice before automatic enrollment occurs, I still don’t like it.

The presence of a 401(k) plan is not, or should not be, a mystery. If an employee isn’t in it, there’s a reason. It may not be a good reason, but at some point you have to decide that they’re big boys and girls, and that it’s their call not to be in it.

Of course, gently reminding them from time to time what they are missing out on is perfectly fine. Telling them that they’ll be forced into the plan unless they do something to stop it is overbearing.

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This is just one number, so you don’t want to make too much of it, but it flies in the face of the “credit isn’t available” meme:

Refinance applications up 4% last week, MBA survey shows

….. The volume of applications to refinance an existing loan increased 4.0% last week compared with the previous week.

Since rates haven’t changed all that much, you would think most of the refis are being done by people facing ARM adjustments — y’know the ones that are supposed to be driving “millions” (reminder: it’s a few hundred thousand at most; to whom some sympathy is of course due) to Armageddon.

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So much for respect of religious beliefs (HT Hot Air).