The Securities and Exchange Commission is monitoring - sometimes daily - whether Wall Street's largest securities firms have adequate cash available, amid losses and turmoil in the subprime-mortgage market, Commissioner Kathleen Casey said yesterday.
The disclosure came on the same day UBS AG, the Swiss investment firm with major U.S. operations, said it would write off $10 billion in mortgage investments as lost. Subprime mortgages are those made to borrowers with poor credit histories.
The SEC is keeping tabs on liquidity, including off-balance-sheet positions, as part of its normal oversight of the five biggest U.S. investment banks, Casey said at an accounting conference in Washington.
The agency also is trying to ensure that the firms correctly inform investors about risks tied to subprime mortgages, including potential losses of assets.
The five biggest investment banks are the Goldman Sachs Group Inc., Morgan Stanley, Lehman Bros. Holdings Inc., Merrill Lynch & Co. Inc. and the Bear Stearns Cos. Inc., all based in New York.
Securities firms and banks this year have taken $76 billion in losses and write-downs stemming from the collapse of the U.S. subprime-mortgage market.
There were also these developments yesterday stemming from the mortgage meltdown and its spread into the general credit market:
Bond insurer MBIA Inc. said it would receive a cash infusion of up to $1 billion from private-equity firm Warburg Pincus L.L.C. to help bolster its capital reserves as it braces for mounting losses and write-downs in the fourth quarter. Last week, MBIA, of Armonk, N.Y., said it was seeking sources of capital to cover shortfalls it might have as credit markets have deteriorated.
Analysts said rising defaults on student loans, coupled with a new law that cuts federal subsidies to student lenders, were beginning to strain the industry. In some cases, families whose home loans are resetting at dramatically higher rates might have a harder time keeping up to date on auto- or student-loan payments.
Bank of America Corp., of Charlotte, N.C., said it was liquidating an enhanced money fund, Columbia Strategic Cash Portfolio, amid withering losses on complex subprime-mortgage investments.
Washington Mutual Inc., the nation's largest savings and loan, said problems in the mortgage and credit markets were forcing it to close offices and lay off 3,100 workers. It will cut its dividend 73 percent.