Credit Suisse Suspends Traders After $2.8 billion write-down

After uncovering the mismarkings of certain asset-backed securities and derivatives, Credit Suisse said that it marked down $2.85 billion in its RMBS and CDO holdings. The markdowns did not impact leveraged finance or CMBS assets, said company officials. The fair value reductions are expected to impact its net income by about $1 billion. Also, the investment bank suspended the traders involved with the mismarkings, although it would not identify the number of individuals involved, who they are or in which office they are based. The heart of the problem, said Dougan, was that certain traders were late in marking their marks, which is a task that they are supposed complete daily. Although the bulk of the $2.8 billion write down can be attributed to market movements, failing to report those marks on time is tantamount to getting the marks wrong, according to company officials. Dougan added that according to the internal review, the mismarkings did not happen as a result of falsified documents. “This is very disappointing to us … particularly disappointing because we’ve been pleased with the way the bank has performed in the last eight months of 2007,” said Credit Suisse CEO Brady Dougan. Despite the disclosure, Dougan added that the bank was “profitable in the quarter to date. We have a lot of momentum that we can take forward.” The disclosure coincided with the closing of a $2 billion subordinate bond offering that launched today and that was also slated to settle today. That bond issuance is part of the bank’s routine fund-raising activities. Some investors on today’s conference call questioned whether the offering would be fully subscribed in light of the disclosure, and one suggested that the bank give serious consideration to price adjustments on the offering. According to company information, the ten-year notes were expected to pay investors 5.75%.