Goldman Sachs: Total Leveraged Credit LOSSES = $1.2 TRILLION

Discussion in 'Wall St. News' started by ByLoSellHi, Mar 31, 2008.

  1. Goldman: Total Leveraged Credit Losses = $1.2 Trillion

    March 30, 2008
    Barry Ritholtz

    Barron's Alan Abelson praised Goldman Sachs' (GS) economic team this weekend, saying, "They're not always right . . . but they do tend to call them as they see them, they avoid as much as possible the usual economic gobbledygook, and the numbers they collect -- the raw material, as it were, of their analyses and forecasts -- are commendably reliable.

    Abelson specifically cited Andrew Tilton's recent report on leveraged losses: "that is, losses inflicted on banks, broker-dealers, hedge funds and government-sponsored outfits by the cruel credit crunch."


    "The sorry total weighs in, by Goldman's reckoning, at a cool $460 billion. And that's after loan-loss provisions.

    Now, $460 billion is a nice round figure, with about half of it losses on residential mortgages and perhaps 15%-20% from commercial mortgages. As Tilton comments, "although we have made considerable progress in the residential-mortgage area, U.S. leveraged institutions have written off less than half" their projected losses. Manifestly a cheerful type, he feels "there is light at the end of the tunnel, but it still is rather dim." So dim, we must admit, that these tired old eyes, strain as they will, have trouble making it out.

    We hate to add to what we consider a pretty gloomy prospect, but Tilton takes care to note that the $460 billion that Goldman expects to go down the drain is "only part of total credit losses," which it anticipates will reach a tidy $1.2 trillion. However, he explains, the leveraged losses are especially critical, as they cause a significant tightening of credit as institutions curb their lending to conserve shrinking capital. Which, for us, anyway, makes the tunnel a lot longer and the light a lot dimmer."

    A trillion here, a trillion there, pretty soon, you're talking real money...

    The True Contrarians
    Barron's, March 31, 20080
  2. that's a pretty big number there with lots of zeros..

    I have a headache now.
  3. G-Boa


    Am I right in saying the U.S. Treasury has around $600 billion (plus $200 billion in subprime paper), and the Abu Dhabi Investment Authority has around the $1 trillion dollar mark - investable cash???

    I wonder how much a real war costs??
  4. Commodities are going to crash.

    I don't care how fast the BRIC countries are *allegedly* growing. The summer Olympics finale in China this summer will mark the death sentence for all things that hurt when you drop them on your foot.