Mother Merrill estimated their losses at $5 billion a couple of weeks ago, and I'm estimating a number closer to $8 billion. It just isn't that Merrill Lynch is so bad; it's just that they're reporting earnings later than UBS, BofA and Citigroup which wrote down about $5 billion apiece. The deterioration in mortgage pricing is accelerating, and MER decided to take on more "risk" to increase profits.
To get a grasp on the size of this loss, just look at the wildfire calamity in California. About 1,500 houses burned already. At $500,000 a home, you have losses of $750 million dollars. Mother Merrill lost 10x that amount! But Stan O'Neal assured Merrill employees that they were watching the store in video feed. Let's see how true that is.
MER's Value at Risk for fixed income (VaR) in the 2nd quarter was $61 million. That's the amount that the quants say they could blow up on a very bad day. So divide $8 billion by 60 days, and I have a loss of $133 million a day. Maybe they need to adjust their VaR's.