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Should Wall Street ever have got so involved in subprime mortgage origination?

Lehman were first to arrive and first to leave. After the bank bought BNC mortgages in 2004 others followed suit. Merrill Lynch bought First Franklin for $1.3bn in 2006, Morgan Stanley bought Saxon Capital for $700m in December and Bear Stearns took over part of ECC Capital early this year.

All in, it was a highly lucrative business.

Then, of course, it all went pear-shaped. Lehman jumped ship at the end of August - selling off BNC for big losses.

Waiting for the other banks to admit write-downs was only ever really a question of time, and honesty. Matthew Albrecht, an equities analyst at Standard & Poor’s told Reuters after the BNC sale that he expected other mortgage originators to suffer soon: “I expect some of those assets to be written down to some extent… whether or not they reduce their operations, we’ll see case by case.”

And on Thursday rumours took to the skies that Merrill Lynch’s First Franklin would be the next originator to come clean with its troubles. The fact that the mortgage provider is still offering subprime terms on its website doesn’t exactly steel us with confidence.

Reports filed with the SEC show that Merrill Lynch Bank & Trust Co, where most of First Franklin is held, lost $111 million though H1 this year, whereas in Q4 2006 - before First Franklin turned up- the division had made money.

Given that US accounting rules require the banks to assess their goodwill payments on a yearly basis, a write-down then, is almost inevitable - it’s unlikely the market will recover anytime soon. More bad news, is this way heading.

Whether, like Lehman, Merrill and Morgan will lose their bottle and sell out altogether, is yet to be seen.