Credit Crisis Far From Over For Financial Sector

Posted In: Banking Crisis, Brokerages, Bubbles, Credit, Financial Sector, Write-Downs

Bank and securities firm write-downs since the beginning of 2007 now total $503 billion. And yet, a number of analysts are saying that the carnage is far from being done. Bloomberg’s Jeff Kearns wrote earlier today:

The credit crisis is “broad, deep, and global” and “far from over” for financial companies even after they reported $500 billion in writedowns and credit losses, Merrill Lynch & Co.’s chief investment strategist said.

“Investors are significantly underestimating both the scope and the extent of the credit bubble and the consequences of its subsequent deflation,” Richard Bernstein wrote in a note to clients. “The problems are not confined to large institutions that are overexposed to U.S. subprime loans.”

The lingering effects of the crisis mean banks and brokerages need “massive” consolidation because of the glut of lending worldwide, Bernstein said.

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Sources:

“Bank Debt Risk Rises as Writedowns, Losses Exceed $500 Billion”
Shannon D. Harrington and Abigail Moses
Bloomberg, August 13, 2008

“Credit Crisis Still ‘Far From Over,’ Merrill’s Bernstein Says”
Jeff Kearns
Bloomberg, August 13, 2008

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