Doomsday estimates of subprime related write-downs of as much as $400 billion, at a time when current Wall Street losses are “only” around $120 billion, beg the question of where the rest of these losses are. Undoubtedly, some part of these as yet unannounced losses will be revealed in many financial institutions’ upcoming earnings releases, as discussed in the February 19, 2008 New York Times article entitled “Wall St. Banks Confront a String of Write-Downs” (here).

But Wall Street woes alone do not encompass the universe of potential losses. As discussed in the February 11, 2008 Financial Times article entitled “The $280bn Question: Where are the Rest of the Subprime Bodies?,” (here), the question that “everyone is trying to work out is where the rest of the bodies are.” The Financial Times article notes that:

Outside Wall Street, suspicions are rife that other institutions are still concealing losses…In particular, there is now rising concern about so-called “buyside” institutions, or entities that have been purchasing mortgage-linked securities in recent years, rather than selling them on. “The problems are moving from the sellside to the buyside – that is where the losses are still to be recognized,” one structured finance expert told a conference in London last week.

There have been some buyside disclosures, the most prominent of which at this point is Bristol-Myers Squibb’s recent $275 write-down of auction rate securities (about which I previously commented here). Whether and to what extent these kinds of write-downs will spread to other nonfinancial companies remains to be seen.

The observers monitoring these developments apparently include plaintiffs’ securities attorneys. A February 19, 2008 Reuters article entitled “Subprime Lawsuits Seen Hitting More Industries” (here) reports that plaintiffs’ attorneys expect that investors lawsuits “likely will spread beyond the financial and housing sectors, as more companies reveal write-downs linked to bad mortgage investments.” The article quotes Salvatore Graziano of the Bernstein Litowitz law firm as saying that “we expect non-real estate companies to start being impacted by this.” He added that his firm has “already gotten a number of inquiries from clients” who are suffering losses from investments they thought were very safe.”

Graziano specifically mentioned the Bristol Myers write-down, commenting that shareholders could potentially bring legal claims against companies that take these kinds of write-downs if the assets were not previously properly valued. He added that “what Bristol-Myers did puts a lot of pressure on the auditors for other companies. That’s why I expect a lot more in coming quarters.”

Graziano also mentions AIG’s recent announcement of potential losses of up to $5 billion in its derivatives portfolio. “I think AIG, without reaching an ultimate conclusion, is a case we’re interested in looking at further.”

More About Auction Rate Securities: In a recent post (here), I discussed the possibility of claims arising from problems connected with auction rate securities. A separate February 19, 2008 Reuters article entitled “Marketing of Auction Rate Securities May Bring Lawsuits” (here) notes that “banks and brokers could face a wave of lawsuits from clients who claim they were not properly told about risks in the now nearly frozen auction rate securities market.” The article quotes Graziano as saying that he has heard “concerns from institutional investors that funds invested in auction rate securities carried an inappropriate level of risk for the kinds of investments they authorized brokers to make.”

Along those same lines, on February 15, 2008, the Miami law firm of Diamond, Kaplan & Rothstein announced (here) that it is “investigating claims involving investment losses in auction rate securities.” The press release specifically mentions broker-dealers that sold auction rate securities, including Lehman Brothers, Goldman Sachs, Merrill Lynch, Citigroup and UBS.

And Then There are the Rating Agencies: One of the recurring themes arising in discussions about subprime issues is the question of the potential liability of the rating agencies (which I discussed most recently here). Jim Peterson at the Re:Balance blog has an interesting discussion (here) of the issues surrounding the rating agencies involvement in the subprime meltdown. Peterson takes the position that the credit rating agencies may not be able to “dodge the bullet” this time. (Peterson is a financial and accounting columnist for the International Herald Tribune.)

Speaker’s Corner: Readers interested in subprime related issues will want to know about two upcoming conferences on the subject. First, IQPC is holding a conference entitled “Subprime and the Credit Crisis” on February 26-27, 2008, in New York City. (agenda here). I will be moderating a panel entitled “Exploring Potential D & O Insurers’ Liability.”

And on March 6, 2008, Mealey’s is sponsoring an event in New York entitled “Subprime-Backed Securities Litigation Conference,” the agenda for which can be found here. I will be speaking on the topic of “CDOs, Asset Valuation and Subprime Litigation So Far.”