Level three assets to rise?

November 7, 2008 | By Jim Kim

Once banks started writing off lots of toxic debt, some thought we'd see a significant decline in level three assets, but that may not necessarily materialize as a trend. JPMorgan said in an SEC filing, for example, that its level three assets are on the rise. The increase reflected transfer of CLOs backed by illiquid debt and issues related to the WaMu deal. the good news is that there were some big offsets in the form of $15.8 billion of sales and markdowns of residential mortgages, leveraged loans and transfers of leveraged loans to level two status. But there were some ominous signs in the release, notably indications that defaults on consumer debt (including home equity and credit card debts) are likely to increase, the Financial Times notes. The charge off rate, 5 percent now, may hit 7 percent by the end of 2009.

For more:
- here's the Financial Times item