Recently the increased defaults in mortgages backing the securities have led to major write-downs in the financial sector this year.

Now is the case of Bank of America. The company’s shares dropped 94 cents, or 2.1% to $43.71, after the bank announced that it expects to put aside $3.3 billion this fourth quarter due to the sinking value of some of its holdings.

This Wednesday, the bank’s Chief Executive Officer, Ken Lewis stated in a speech at a Goldman Sachs Investor Conference Market Scan that he expects in the matter of quarterly earnings that results will be disappointing.

There were expected write-downs of $3 billion but they might be higher than this. The final write-downs of collateralized debt obligations are unknowable but it is expected that the bank will be profitable in the fourth quarter.

Collateralized debt obligations are securities that are backed by bonds, loans and other assets. Their value has plummeted recently due to defaults in mortgages backing the securities.

The good news is that, this Wednesday, the Federal Reserve announced a plan to help banks confronting with major write-downs that erodes their capital. The Federal Reserve will set up a temporary auctions facility and qualified banks will be able to bid for funds.