Write-Downs Approach $500 Billion, With More To Come

Posted In: Banking Crisis, Brokerages, Crash Prophets, Credit, Financial Sector, Investment Banks, Write-Downs

According to Bloomberg today, the world’s biggest banks and brokerages have reported $497 billion of write-downs since the start of 2007.

And the end is nowhere in sight, according to CNN Money’s Paul R. La Monica. The editor-at-large wrote this morning:

Make no mistake: The worst probably is not over for financial firms. Not by a long shot.

Many bank stocks have bounced sharply from their panic-induced lows of mid-July on hopes that the bleak second-quarter results represented the bottom.

But the bigger-than-expected losses reported by Freddie Mac and Fannie Mae this week, accompanied by dismal forecasts for the housing market, are strong indicators that there are likely more credit-related woes to come.

“The banks are still at the mercy of writedowns. I don’t think the worst is over for financials yet,” said Liz Ann Sonders, chief investment strategist with Charles Schwab & Co.

The International Monetary Fund forecasts that global losses tied to the credit crisis will be $945 billion. It’s a widely used number, but Sonders thinks it’s “potentially very conservative.”

So how high could losses go? Sonders points to the $1.6 trillion forecast from hedge fund firm Bridgewater Associates or even the $2 trillion number from Nouriel Roubini, the highly-respected professor of economics at NYU’s Stern School of Business.

And based on the losses already reported, we’re not even halfway through the crisis.

Source:

“$1 trillion in losses? Bank on More”
Paul R. La Monica
CNN Money, August 8, 2008

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