Thursday, Jul 19, 2007
Bernake admits there will be losses
FT.com: Fed chief says subprime losses could hit $100bn
Total losses from the subprime mortgage meltdown may be in the order of $50bn to $100bn, according to estimates cited by Ben Bernanke in testimony to Congress on Thursday.
Posted by dohousescrashinthewoods @ 04:22 PM (384 views) Add Comment
7 Comments
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1. Orwell said...
Does this mean then that as we found out about Bear Sterns, when the Merchant Banks intervened in the arena before the auction was to begin of the assets at that point valued as at 30% of the 'worth', (nb I like the word 'worth' as this is what house owners (inc. Kirstie) say, what's it 'worth'?), the alleged value of all subprime mortgages in hedge funds are £300billion? From which presumably the investors get £100billion back, the Insolvency Practitioners, Lawyers and Accountants get £200 billion and there is a £100 billion loss?
Extraordinary!!!
2. tyrellcorporation said...
In your dreams Benny!
3. mrmickey said...
Thank goodness it's not real money
4. dobber said...
And then there are the knock on losses:
1. Hedge funds gearing (ala Bear Stearns) upto 10:1
2. Private (Pirate) Equity, KKR, Blackstone and the like.
This is going to get very ugly.
5. dohousescrashinthewoods said...
Good point, dobber, it has often struck me that:
- private equity boils down to taking out a bank loan in the name of a company and then walking away with the money
- in a credit crunch, companies which have been saddled with debt will go under
If a company holding any of my money is bought out by private equity, I intend to move the funds.
6. maddison said...
$50bn to $100bn sounds alot but in the grand scheme of things it isnt. The Olympics is going to cost the UK $20bn dollars. If anything it will be a stark warning to people who over lend and as such will keep the boom in check and so any subsequent bust.
7. dobber said...
Maddison,
To put this into perpective here is a quote from an earlier post from Motley Fool:
'Apocalyptically, the CDO crisis could erode the entire $1,000bn capital base of the US banking system'
Bernanke is already admitting this could wipe out 10%, add in hedge funds and private equity, oh dear!