Thursday, March 27, 2008

HOW BIG? Does anyone really know?

Goldman sees credit losses totaling $1.2 trillion

NEW YORK (Reuters) - Goldman Sachs forecasts global credit losses stemming from the current market turmoil will reach $1.2 trillion, with Wall Street accounting for nearly 40 percent of the losses. Of the cumulative losses expected by these leveraged players, bad residential home loans will represent about half, while poor-performing commercial mortgages will represent 15 percent to 20 percent.

Posted by malct @ 12:14 PM (713 views)
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2 thoughts on “HOW BIG? Does anyone really know?

  • shipbuilder says:

    I guess this is them telling the Fed how much to write the cheque for.

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  • How Big indeed. Every week the figures are revised up, and we’re still primarily talking about mortgage related debt – how big is corporate paper debt? Car loans, credit card, personal loans, etc..
    “One look at Citigroup, using SEC data, suggested that their potential liability could be $343bn rather than the $55bn they declared. ” This was reported on the BBC – Carnage on Wall St (http://news.bbc.co.uk/1/hi/business/7086909.stm)
    And “Another key measure of the stress on banks is the amount of so-called “tier 3″ capital they are carrying on their books. These are risky loans that cannot be valued except by an economic model because there is no market for them..
    By that measure, the big investment banks like Goldman Sachs and Morgan Stanley are much more exposed, relative to their total capital, than Citigroup or Merrill Lynch.”
    GULP! So the facts seem support that the level of risky debt is enormous, and the Banks know it, hence they wont lend to each other. It’s likely then that the situation is far, far worse than even today’s current consensus, and we will be drip-fed the bad news over the coming 12- 18 months – maybe longer. However, I’m sure there’ll be lots of little ‘sucker’ rallies on the way!

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