The carnage from the collapse in subprime may be mounting more quickly than previously thought.

An analyst with Goldman Sachs has sharply raised his forecasts for write-downs at Citigroup, J.P. Morgan Chase, and Merrill Lynch. Most of these write-downs are on the banks' holdings of collateralized debt obligations, arcane investments derived from securities tied to subprime mortgages.

The analyst, William Tanona, now expects a write-down of $18.7 billion in the fourth quarter at Citigroup, up from an earlier forecast of $11 billion. He also expects a write-down of $3.4 billion at J.P. Morgan, double his earlier prediction of $1.7 billion, and a write-down of $11.5 billion at Merrill Lynch, up from $6 billion.

"Although we have seen many firms take the appropriate actions in recent weeks as they relate to write-downs and capital raises, we still believe it will be a couple of quarters before the current credit crisis is fully digested by the markets," Tanona wrote in a note to investors.

Another analyst, Brad Hintz of Sanford C. Bernstein & Co., is predicting a $10 billion fourth-quarter write-down at Merrill.

Tanona says that Citigroup may need to cut its dividend by 40 percent, contending that the bank needs to raise an additional $5 billion to $10 billion.

Hugo Dixon in Breakingviews.com argues that it's time for Citigroup—and Merrill and Morgan Stanley—to scrap their dividends. He notes that Citigroup spent $10.7 billion this year paying out its quarterly dividend of 54 cents a share. That's more than the $7.5 billion it received when it reached a deal to sell a 4.9 percent stake to the Abu Dhabi Investment Authority last month.

The alternatives to cutting or eliminating dividends—selling assets cheaply or raising capital on expensive terms—are less attractive, he says.

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