Based on Price-to-Book ratios (P/B), the bulge bracket banks are trading at great discounts. Even taking into consideration the likely book value write-offs due to subprime holdings, they are still trading at a great value. Consider the following examples:

**Morgan Stanley (NYSE:MS)**: Historical P/B is around 2.4, while current P/B is about 1.75. Further, MS is trading at a 31% discount to its 52-week high.

**Lehman Brothers (LEH)**: Historical P/B is around 1.9, while current P/B is about 1.49. Further, LEH is trading at a 37% discount to its 52-week high.

**Merrill Lynch (MER)**: Historical P/B is around 1.9, while current P/B is about 1.73. Further, MER is trading at a 25% discount to its 52-week high.

**Bear Stearns (NYSE:BSC)**: Historical P/B is around 1.7, while current P/B is about 1.28. Further, BSC is trading at a 37% discount to its 52-week high.

**Goldman Sachs (NYSE:GS)**: Historical P/B range is between 2.0 and 3.6, while current P/B is about 2.08. Further, GS is trading at a 24% discount to its 52-week high.

Most of the analyst valuation models I have reviewed have factored in a 10% to 12% decrease in bulge bracket valuations due to the subprime imposed liquidity crunch, yet the markets have factored in much greater discounts. In fact, many of the bulge bracket banks have lost more than one third of their total market value due largely to the liquidity crunch.

Personally, I'd never make an investment decision based entirely on P/B ratios, but in this case they have definitely grabbed my attention. I'll be bargain hunting in this space as I won't be surprised if we look back twelve months from now and wonder how the market ever let valuations get so low.