Comments on: Forecast: $2 Trillion in US Originated Credit Losses http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated.html Sun, 22 Nov 2009 06:06:33 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: eh http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated.html#comment-6953 eh Thu, 17 Apr 2008 09:31:00 +0000 http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated-credit-losses/#comment-6953 <i>I should have mentioned in the set-up that he seemed to be putting an awfully large percentage of prime loans in the default prone category.</i><br/><br/>More pessimism about prime loans may be justified (although maybe not quite so much of it) because at this point it has been consistently shown that negative equity is the biggest factor in defaults, and not ability to pay (i.e. the 'primeness' of the loan). And whether a borrower falls into that has little to do with his own personal situation. Factor in (likely) increased joblessness going forward. I should have mentioned in the set-up that he seemed to be putting an awfully large percentage of prime loans in the default prone category.

More pessimism about prime loans may be justified (although maybe not quite so much of it) because at this point it has been consistently shown that negative equity is the biggest factor in defaults, and not ability to pay (i.e. the ‘primeness’ of the loan). And whether a borrower falls into that has little to do with his own personal situation. Factor in (likely) increased joblessness going forward.

]]> By: Yves Smith http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated.html#comment-6948 Yves Smith Thu, 17 Apr 2008 05:48:00 +0000 http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated-credit-losses/#comment-6948 Anon of 1:39 AM,<br/><br/>I should have mentioned in the set-up that he seemed to be putting an awfully large percentage of prime loans in the default prone category. Anon of 1:39 AM,

I should have mentioned in the set-up that he seemed to be putting an awfully large percentage of prime loans in the default prone category.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated.html#comment-6947 Anonymous Thu, 17 Apr 2008 05:46:00 +0000 http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated-credit-losses/#comment-6947 "So let’s add up all the classes of default prone household borrowings. The total is on the order of $6 or $7 billion overall. "<br/><br/>Trillion?<br/><br/>Winslow R. “So let’s add up all the classes of default prone household borrowings. The total is on the order of $6 or $7 billion overall. “

Trillion?

Winslow R.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated.html#comment-6946 Anonymous Thu, 17 Apr 2008 05:39:00 +0000 http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated-credit-losses/#comment-6946 I am an uber bear, but I do not buy the analysis. 50% of default prone loans will not go into default. We may well hit $2T loss - but only if house values fall enough to send a substantial sum of prime borrowers underwater. Even then we are in uncharted territory. I am an uber bear, but I do not buy the analysis. 50% of default prone loans will not go into default. We may well hit $2T loss – but only if house values fall enough to send a substantial sum of prime borrowers underwater. Even then we are in uncharted territory.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated.html#comment-6945 Anonymous Thu, 17 Apr 2008 05:32:00 +0000 http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated-credit-losses/#comment-6945 Shughart on Bailouts<br/><br/>Don Boudreaux<br/>http://cafehayek.typepad.com/hayek/<br/><br/>The record of government bailouts of private financial institutions in the 1930s, of Continental Illinois Bank in 1984 (which cost $8 billion) and of the entire U.S. savings & loan industry in the late 1980s and early 1990s (which cost $125 billion) teaches that emergency loans keep weak institutions alive just long enough for their problems to increase. Bailouts encourage more risk-taking and eliminate the freedom to fail that is just as essential to a free-market economy as the freedom to succeed. Shughart on Bailouts

Don Boudreaux
http://cafehayek.typepad.com/hayek/

The record of government bailouts of private financial institutions in the 1930s, of Continental Illinois Bank in 1984 (which cost $8 billion) and of the entire U.S. savings & loan industry in the late 1980s and early 1990s (which cost $125 billion) teaches that emergency loans keep weak institutions alive just long enough for their problems to increase. Bailouts encourage more risk-taking and eliminate the freedom to fail that is just as essential to a free-market economy as the freedom to succeed.

]]> By: Anonymous http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated.html#comment-6943 Anonymous Thu, 17 Apr 2008 04:27:00 +0000 http://www.nakedcapitalism.com/2008/04/forecast-2-trillion-in-us-originated-credit-losses/#comment-6943 No big deal really, as The Fed is backing up stocks, which act as collateral for all the bad synthetic bets; relax, Ben has more money and stocks are on fire and the next bubble is under way, which covers the other bubble. No worries! No big deal really, as The Fed is backing up stocks, which act as collateral for all the bad synthetic bets; relax, Ben has more money and stocks are on fire and the next bubble is under way, which covers the other bubble. No worries!

]]>