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Wednesday, November 07, 2007

RBS: $250 billion to $500 billion in Credit Crisis Losses

by Calculated Risk on 11/07/2007 01:10:00 PM

From Bloomberg: Banks Face $100 Billion of Writedowns on Level 3 Rule, RBS Says

U.S. banks and brokers face as much as $100 billion of writedowns because of Level 3 accounting rules, in addition to the losses caused by the subprime credit slump, according to Royal Bank of Scotland Group Plc.
And on total credit losses:
``This credit crisis, when all is out, will see $250 billion to $500 billion of losses,'' London-based Janjuah said. ``The heat is on and it is inevitable that more players will have to revalue at least a decent portion'' of assets they currently value using ``mark-to-make believe.''
Back in July, when Bernanke suggested the losses would be in the $50 Billion to $100 Billion range, I joked that he had dropped a zero.
"Some estimates are in the order of between $50 billion and $100 billion of losses associated with subprime credit problems," [Bernanke] said (July 19, 2007).
I thought I was exaggerating for effect - although $50 to $100 Billion seemed too low, I didn't really think the losses would reach $500 Billion to $1 Trillion. Based on this new estimate from RBS, maybe I wasn't far off.

Note: these losses don't include the coming $2+ Trillion in household net worth losses due to house prices falling over the next couple of years.