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Tuesday, April 08, 2008

IMF: Financial Losses May Approach $1 Trillion

by Calculated Risk on 4/08/2008 11:37:00 AM

From Bloomberg: IMF Says Financial Losses May Swell to $945 Billion

Falling U.S. house prices and rising delinquencies may lead to $565 billion in mortgage-market losses, the IMF said in its annual Global Financial Stability report, released today in Washington. Total losses, including the securities tied to commercial real estate and loans to consumers and companies, may reach $945 billion, the fund said.

The forecast signals the worst of the credit crunch may be yet to come ...

``The current turmoil is more than simply a liquidity event, reflecting deep-seated balance-sheet fragilities and weak capital bases, which means its effects are likely to be broader, deeper and more protracted,'' the report said. The fund warned of the risk of ``a serious funding and confidence crisis that threatens to continue for a significant period.''
The IMF has been playing catch up.

Roubini's forecast, in his recent testimony to Congress, were losses close to $1 trillion: The Current U.S. Recession and the Risks of a Systemic Financial Crisis

And Goldman Sachs is now projecting $1.2 trillion in losses:
Residential mortgage losses will represent about half the damage, with another 15%-20% coming from commercial mortgages. Credit card loans, auto loans, commercial and industrial lending, and nonfinancial corporate bonds make up the remainder.
The losses to leveraged US financial institutions make up only a part of total credit losses, which we expect to be $1.2 trillion.
And from the WSJ last December:
Back in the U.S., the Calculated Risk blog sidestepped the colorful language and went straight for the big number: “The losses for the lenders and investors might well be over $1 trillion.”