The costs of the credit squeeze mounted on Wall Street as Merrill Lynch revealed a “staggering” $7.9bn writedown on mortgage-backed securities and Bank of America said it was cutting 3,000 jobs. The head of the investment bank, Gene Taylor, will leave as part of the shake-up. The Merrill losses, $3.5bn more than it had predicted less than three weeks ago, were the biggest reported by any bank since the credit turmoil began, and BofA’s layoffs were the deepest so far on Wall Street, raising fears that there was more pain to come. Lex wonders how Merrill could have got the scale of its exposure to losses so wrong? A huge question mark now hangs over Merrill’s ability to manage risk - the foundation of any investment bank.
