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Scott Jagow: Something else Wall Street will be watching closely today. Lehman Brothers reports third-quarter profits. Lehman is the first investment bank to turn in its numbers since the subprime market came crashing down. The other big banks report later this week. More now from Amy Scott.
Amy Scott: Investors have been expecting the worst. Every major investment bank has seen its stock plunge since early summer, as shareholders started to worry about the banks’ exposure to risky debt.
Ben Wallace is an analyst with Grimes and Company. He says Wall Street firms make money on a range of products, from mortgage-backed securities to the bonds and loans that fund corporate buyouts.
Ben Wallace: It’s pretty much throughout the food chain they’re making money along the way. So as the business slows down, the profits will take a hit.
Analysts will be poring over these earnings. Top of their list — how the banks value certain assets that may have been hit by the credit crunch.
New accounting rules say the banks have to distinguish between securities with a clear market value and those that don’t trade very often and require a little more guesswork.
Because the market has dried up and many credit-related investments aren’t trading these days, some analysts expect this round of earnings to be a bit of a guessing game.
In New York, I’m Amy Scott for Marketplace.
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