Merrill Lynch & Co., the world’s largest brokerage, annouced today that it plans to exit the business of underwriting collateralized debt obligations and other structured credit products after the securities led to a record loss.
“We are not going to be in the CDO and structured-credit types of business,” new Chief Executive Officer John Thain said today at an investor conference in New York. He wasn’t more specific.
Merrill posted its largest-ever loss last year after writing down the value of its CDOs and other assets related to subprime mortgages by more than $24 billion. The New York-based bank was the biggest underwriter of CDOs from 2004 through 2006, and got stuck with some of the products as investor demand declined.
The market for CDOs, which repackage assets into new securities with varying degrees of risk, has been frozen since last July when two Bear Stearns Cos. funds that invested in them collapsed. Merrill Lynch will focus on improving its rankings on stock and bond underwriting league tables instead, Thain said.
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