First Merrill. Who's Next?

The troubled investment bank sold roughly $30 billion in collateralized debt obligations (C.D.O.s), or packaged mortgage securities, for $7 billion – a fire sale aimed at eliminating the company's most troubled assets and cleaning its balance sheet.

Take the losses and start over. Merrill shares subsequently rose 7.9 percent.

Now analysts say other troubled firms will follow suit.

"This is setting some sort of precedent for these prices," Stuart Plesser, an analyst with Standard & Poor's Equity Research, told the New York Times.

Citigroup, much like Merrill Lynch, exposed itself to mortgage securities. A Deutsche Bank analyst said the mark established by Thain might cost Citigroup up to $8 billion, according to a Times report. Other analysts estimate the possible Citigroup write-down will be closer to $6 billion.

Vikram Pandit, Citigroup's CEO, has recently expressed optimism about the value of the bank's CDO holdings. Citigroup has $22.5 billion of net exposure to C.D.O.s

"We expect peers will adjust marks (prices), eliminating an incentive to hold on to impaired assets," Kenneth Worthington, a J.P. Morgan analyst, said in a report, according to the Associated Press. "We see this a part of the cleansing process."

In addition to Citigroup, analysts say that J.P. Morgan Chase, Bank of America and Morgan Stanley, among others, could follow in Merrill's footsteps.

Merrill sold its C.D.O.s to Dallas-based Lone Star Funds, and agreed to lend the fund group roughly 75 percent of the purchase price.

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