BlackRock's Fink Says Subprime Credit Losses to Rise

Laurence Fink, who helped create the market for mortgage-backed securities, said the credit losses that have already cost banks and securities firms $45 billion are about to get worse.

Fink, chief executive officer of New York-based fund manager BlackRock Inc., said today at an investor conference that ``many institutions don't understand what the credit crunch is going to do to earnings and their balance sheet.'' At the same conference, Goldman Sachs Group Inc., CEO Lloyd Blankfein said his firm is continuing to bet that mortgage-backed securities and collateralized debt obligations will fall.

The outlook is another indication that the contagion from losses on mortgages to people with poor credit is continuing to spread. Bank of America Corp. Chief Financial Officer Joe Price said the second-largest U.S. bank may write down $3 billion of subprime-related debt in the fourth quarter.

At the investor conference in New York, sponsored by Merrill Lynch & Co., Blankfein said Goldman, the world's most profitable investment bank, doesn't plan to take any significant writedowns on mortgage-related assets. Goldman shares rose 8.5 percent to $233.04 at 4 p.m. in New York Stock Exchange composite trading, and other financial stocks also climbed.

``We continue to be net short in these markets,'' Blankfein, 53, said in response to a question about the New York-based firm's position.

Financial Shares Rally

Banks and brokerages in the Standard & Poor's 500 Index have rallied 7.6 percent since reaching a two-year low on Nov. 7. Bank of America, based in Charlotte, North Carolina, climbed 5.2 percent today to $46.27. Lehman Brothers Holdings Inc. jumped 9.2 percent to $63.49 after UBS AG analyst Glenn Schorr said the New York-based securities firm's potential CDO losses are ``negligible.''

``I don't know when it's over, but it's not over yet,'' Fink, 55, said. ``The bottom has not been achieved yet.''

The selloff of financial stocks had gained steam after Merrill Lynch announced a record $8.4 billion credit writedown on Oct. 24, which led to the ouster of CEO Stan O'Neal. Deutsche Bank AG yesterday said credit losses may reach $400 billion, while Lehman last week predicted losses would reach $250 billion over the next five years.

At the same time, money managers including Bank of America and Baltimore-based Legg Mason Inc. have collectively set aside almost $500 million to prop up money-market funds that invested in debt issued by structured investment vehicles, known as SIVs.
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