How Mizuho Loved and Lost in CDOs

They brought aboard the Dream Team, but the result was nightmarish.

Looking to charge into the red-hot U.S. business of subprime debt two years ago, Mizuho Financial Group Inc.'s brokerage poached 11 bankers, traders and salespeople, headed by structured-finance ace Alexander Rekeda, from investment bank Calyon. Mizuho wanted to quickly ramp up its business of packaging mortgage loans into collateralized-debt obligations.

Calyon's parent, French bank Crédit Agricole SA, was so upset, it sued Mizuho. Turns out, though, the expertise both banks prized has backfired on them, harming their profitability.

When Mizuho releases earnings Thursday, it projects its losses from mortgage-related ...