Thursday, July 19, 2007
How can a USD52 billion loss go unnoticed?
NEW YORK - Credit Suisse analysts estimated banks could lose up to $52 billion over time due to their exposure to collateralized debt obligations that invested in U.S. subprime mortgages. Most of the losses would stem from loans to hedge funds, compared with an expected $5 billion to $10 billion from banks' direct investment in subprime CDOs, the Credit Suisse analysts said in a report dated July 6. The global financial system can absorb such losses, the analysts said, but the prospects for the subprime mortgage sector remains murky. The risks of CDO downgrades by rating agencies and further depreciation in the U.S. housing market could result in erosion in CDO values, according to the report.