Foreclosure’s Fallout, 2 Titans Tumble

Every time Wall Street executives and economists think they have acknowledged the full extent of the subprime mortgage meltdown in the residential real estate sector, more bad news is uncovered.

Last week, Citigroup’s chief executive Charles Prince tendered his resignation — another casualty of the growing subprime fiasco. Prior to Prince’s departure, Citigroup said that it would take additional write-downs of $8 billion to $11 billion in the fourth quarter, a large and unexpected loss that could wipe out the period’s entire profit. Citigroup’s board turned to Robert Rubin, the former Treasury secretary to replace Prince.

Nobody knows how many billions of dollars the embattled bank has lost, but Wall Street investors are growing more concerned about the deteriorating housing market and the widening impact of the growing credit crunch. Investor sent the largest U.S. bank’s stock down 36 percent to date to $35.90 a share.

Another Wall Street firm, Merrill Lynch, lost a huge pile of money too. Merrill Lynch’s shocking $8.4 billion loss in the subprime mortgage sector — the biggest loss in the brokerage’s 93-year history — brought down chief executive office Stan O’Neal.

Big debt problems at two leading banks gives rise to fears that other banks may write down the value of more subprime-related debt. Some experts think the financial services industry is sitting on $60 billion in undisclosed losses. Bill Gross, chief investment officer at the world’s No. 1 bond fund PIMCO, believes the subprime crisis as a “$1 trillion problem.”

Whatever the grim statistic is, expect more bank-owned foreclosures ahead and more Wall Street titans to tumble.