Bloomberg News is reporting that UBS estimates that globally financial firms are expected to lose up to $600 billion due to the collapse in the subprime mortgage market and credit crisis. The article quotes Gerad Charpin, head of European credit strategy for UBS:
"We have to recognize the risk that the economy will suffer more damage than what consensus suggests. All the investment schemes that have been built on the basis of a strong and resilient economic backdrop have to be unwound/scaled down."
"Our global banks team estimates total industry losses in this financial crisis should reach north of $600 billion, of which listed banks and brokers should account for 'only' $350 billion."
Of the $350 billion, attributed to the financial industry, only $160 billion in losses have been announced. Since it has taken 6-9 months for companies to report the $160 billion, one could estimate that it may take another year for all the loses to be announced.
What is interesting is the other $250 billion, or close to 40% of the total losses, may be the responsibility of 'others'. These 'others' may not be as eager to disclose their loses and keep them on their books, causing them to be less willing to put money to a productive use in the future (like bailing out US banks and brokers).
Most of the news about the current financial crisis has been focused on problems with the companies based in the states. The thing to remember is that a lot of the 'innovative' credit products (CDO's & ABSs) were sold to foreign banks, financial companies and governments. Foreign banks, financial companies and governments have been the buyer of last resort (or suckers) for the debit generated by US consumers, companies and our government.
Having loaded up on credit products that are now worth less than what they were purchased for, will make these same entities less like to buy debit in the future. All of which seems to compound the current problem of no one wanting to lend money.
Source:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQFTerb4XMU8&refer=home
http://www.reuters.com/article/bondsNews/idUSL2976281020080229
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