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Goldman holds more sour debts than rival firms

Goldman Sachs Group Inc held a bigger proportion of hard-to-value assets at the end of the Q3 than Citigroup Inc and Merrill Lynch & Co, two of the firms hardest hit by subprime mortgage losses.

Goldman’s Level 3 assets, for which market prices are so scarce that companies use internal models to gauge their value, accounted for 6.9% of the New York-based firm’s $1.05 trillion total at the end of August, according to a filing with the US Securities and Exchange Commission. Citigroup classified 5.7% of its assets as Level 3 on Sept. 30 and Merrill reported 2.5%, according to Bloomberg News.

Investors have grown wary of banks and brokerages with difficult-to-sell securities on their books, after profits at Citigroup and Merrill were crippled by at least $19 billion of write-downs, mostly from bonds backed by home loans to borrowers with poor credit histories. While Goldman officials say the firm won’t report an “extraordinary” drop in its subprime holdings, investors have remained skeptical, pushing its shares down 15% this month on New York Stock Exchange. “It’s hard to believe Goldman is perfect,” said Jon Fisher, who helps oversee $22 billion at Minneapolis-based Fifth Third Asset Management and sold his Goldman, Merrill and Morgan Stanley shares in the past 12 months. “Their losses might be smaller than others, but that doesn’t mean they don’t have a problem.” Goldman posted a 79% increase in Q3 profit, the biggest on Wall Street, even after shaving $1.48 billion from the value of high-yield loans. (