Lifting the Lid: Were banks' writedowns too little, too late?

By Emily Chasan

NEW YORK (Reuters) - As banks disclose more multibillion dollar write-downs spurred by the collapse of the subprime mortgage market, investors increasingly want to know what the banks knew, and when they knew it.

While some say no one could have predicted how quickly the credit markets would seize up, others say big banks are in the business of risk management and managers could have done a much better job balancing risks.

"When we are talking about numbers of this magnitude, there really is no excuse for people to suddenly discover that they are confronting potential risks many billions of dollars higher than what they anticipated," said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission, now chief executive of consulting firm Kalorama Partners.

"The problem really relates to the internal capacity at any of these banks to identify with some degree of accuracy what their true risk profile is."

As banks struggled to assess the risk of tens of thousands of loans carved up and pooled into various securitized products, input from auditors and changing market conditions could have boosted the amount of time necessary to sort through the paperwork.

"I really believe they are trying to be thorough," said Ned Riley, chief executive of Riley Asset Management and former chief investment strategist at State Street Global Advisors.

"Even in the age of technology and automation this is still a process that requires human input, experience and obviously it has to pass the scrutiny."

And the banks, which adopted mark-to-market accounting rules earlier than required, have been providing more transparency than ever before in the most opaque areas of their business.