1. Merrill Mishap

Merrill Lynch ( MER) stepped in the subprime mess.

The New York-based brokerage firm stunned investors Wednesday by reporting its biggest quarterly loss ever on a stunning 94% drop in revenue. CEO Stan O'Neal said the culprit was the plunging value of the firm's holdings of mortgage-related securities.

"The bottom line is we got it wrong by being overexposed to subprime," O'Neal said on an earnings conference call, "and we suffered as a result of an unprecedented liquidity squeeze and deterioration in that market."

Also unprecedented was how Merrill's third-quarter numbers kept getting worse even after the quarter was over. Back on Oct. 5, a week after the quarter's end, the firm warned investors that it expected to lose as much as 50 cents a share for the period. Merrill said losses tied to subprime mortgage securities would result in an asset writedown of around $5 billion -- the biggest on Wall Street in years.

But three weeks later, when Merrill reported its finalized third-quarter results, the loss was actually $2.85 a share -- and the writedown was a staggering $8 billion.

Disconcertingly, Merrill declined to explain the sudden $3 billion change -- except to claim that the valuations behind the latest writedown "are conservative and appropriate," as finance chief Jeff Edwards said.

"Let me just say that what we have provided, again, what we think is an extraordinarily high level of disclosure that should be sufficient," he sniffed in response to one question.

Merrill's stonewalling led one analyst to observe that while the firm had indeed disclosed more than other brokerage firms, "your peers didn't take an $8 billion writedown." But O'Neal and Edwards continued their dance.

"I cannot tell you what the market trajectory might be from here," O'Neal replied, "but ... we are comfortable that we have marked these positions conservatively."

Sounds like Merrill's giving us more of the same old bull .

Dumb-o-Meter score: 93. "No one -- no one -- is more disappointed than I am in that result," O'Neal said of Wednesday's $2.2 billion loss.

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