Credit Crisis Math: Report Sees $1.5 Trillion In Losses


Over the weekend word began to leak out about a report from Europe predicting losses at financial companies would be twice as large as many had predicted and far larger than have been declared by banks and securities firms so far. In April the IMF had estimated that world wide losses from mortgages and other debt would amount to $1 trillion. The new report, which turns out to have been based on a confidential memorandum from Bridgewater Associates, put that losses at half again as high, $1.5 trillion. To put this in perspective, that would mean that we're only about one-third of the way down.
The German language newspaper SonntagsZeitung said there will probably be a financial "avalanche" of distresses debt securities. It warned that financial institutions may not be able to raise enough capital to cover the losses. In other words, we should be ready to see at least one more bank or brokerage collapse. At least one.
Brisante Studie: Die Bankenkrise wird noch viel schlimmer [SonntagsZeitung]
Banking Crisis May Cause $1.6 Trillion in Losses, Sonntags Says [Bloomberg]