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Thread: US mortgage crisis to cost $1.3 trillion worldwide

  1. #1
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    Default US mortgage crisis to cost $1.3 trillion worldwide

    April 9, 2008

    US mortgage crisis to cost $1.3 trillion worldwide


    WASHINGTON - THE International Monetary Fund said the worldwide losses stemming from the United States subprime mortgage crisis could hit US$945 billion (S$1.3 trillion) as the impact spreads in the global economy.

    The IMF, in a particularly stark report, said on Tuesday that falling US housing prices and rising delinquencies on the residential mortgage market could lead to losses of US$565 billion.

    That, combined with other categories of loans originated and securities issued in the United States related to commercial real estate, the consumer credit market and corporations 'increases aggregate potential losses to about US$945 billion', it said.

    'The crisis is spreading beyond the US subprime market - namely to the prime residential and commercial real estate markets, consumer credit, and the low- to high-grade corporate credit markets,' the IMF said in releasing its semiannual Global Financial Stability Report.

    While the US remains the epicentre, 'financial institutions in other countries have also been affected, reflecting the same overly benign global financial conditions and to varying degrees - weaknesses in risk management systems and prudential supervision'.

    It was the first time the multilateral institution has made an official estimate of the global losses suffered by banks and other financial institutions in the credit squeeze that began eight months ago in the United States, amid rising defaults on subprime, or high-risk, home loans.

    The staggering US$945 billion estimate of losses, made in March, represents roughly US$142 per person worldwide and represents four per cent of the US$23.21-trillion credit market.

    The IMF said that global banks likely will shoulder about half of the losses - at US$440 billion to US$510 billion.

    Last month, ratings agency Standard & Poor's estimated global banking firms would likely write off US$285 billion in various securities linked to US subprime real estate, with more than half the losses already recognised. Some analysts have put the figure higher for the subprime market and related losses.

    'Leading indicators point to a tightening of credit conditions across many economic activities,' Mr Jaime Caruana, head of the IMF's Monetary and Capital Markets Department, said at a news conference.

    Mr Caruana said the losses 'suggest a potentially large impact on US economic growth', and that Europe may also see tightening conditions and slowing credit growth under the global financial strain.

    The IMF releases its biannual World Economic Outlook on Wednesday and already has said it would slash a half percentage point off its forecast of 2008 global economic growth, to 3.7 per cent.

    The Global Financial Stability Report cautioned that loss estimates were imperfect and could go higher.

    The unusually precise and harsh report comes ahead of the IMF and the World Bank spring meetings on Saturday and Sunday in Washington.

    The IMF, whose core mission is to promote global financial stability, said there was 'a collective failure to appreciate the extent of leverage taken on by a wide range of institutions - banks, monoline insurers, government-sponsored entities, hedge funds - and the associated risks of a disorderly unwinding'.

    'It is now clear that the current turmoil is more than simply a liquidity event, reflecting deep-seated balance sheet fragilities and weak capital bases, which means its effects are likely to be broader, deeper, and more protracted,' it said.

    The report criticises the 'excessive risk-taking' and 'weak underwriting' undertaken by under-capitalised institutions.

    The IMF recommended a range of measures to address issues raised by the crisis, including better coordination between central banks, improved transparency from financial institutions and reform of ratings systems.

    'Shoring up the confidence in financial institutions should be a priority,' it said. -- AFP

  2. #2
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    Default Re: US mortgage crisis to cost $1.3 trillion worldwide

    Actually the problem is not the subprime.It is Iraq.The whole world is hookwinked by US trying to draw attention from their 'Vietnam in Iraq'.They want us to pay for their Iraq ops.

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    Default Re: US mortgage crisis to cost $1.3 trillion worldwide

    IMF belongs and is controlled by US.

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    Default Re: US mortgage crisis to cost $1.3 trillion worldwide

    actually this US sub prime might be just some

    "Show"

    who know what are they up to?

    i mean US is a powerful country , and having the best

    education system in the world

    how can they end up in such a manner?

  5. #5
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    Default Re: US mortgage crisis to cost $1.3 trillion worldwide

    You mean "was"....
    They used to export goodies.. Now turmoil..

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    Thumbs down Re: US mortgage crisis to cost $1.3 trillion worldwide

    US sux lah!! They make the oil price jumped, they are the no 1 contributer to global warming, They causes countries to lose $1.3T which definitely US will not pay. And now they causes all kind of commodities to increase including rice!!
    They try to starve us or even kill us is it?

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    Default Re: US mortgage crisis to cost $1.3 trillion worldwide

    They need to do these things to finance their crap Iraq war which got no end until bush is gone.

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    Default Re: US mortgage crisis to cost $1.3 trillion worldwide

    'Leading indicators point to a tightening of credit conditions across many economic activities,' Mr Jaime Caruana, head of the IMF's Monetary and Capital Markets Department, said at a news conference.
    Tighter credit conditions in Spore has seen its first victim ie Bravo saga. Much of the spectacular growth we have seen over the past few years have been a result of excess liquidity, excessively lax lending and over leveraging by individuals and corporates. These are being unwound now and companies and individuals who have strived on excessive leverage will now find themselves high and dry - literally. It will take more than just a year to deleverage everybody's balance sheet before we get some form of stability.

    I believe we are done with the first wave whereby the big hoo-haa over sub-prime and the credit market crunch makes headlines. Unfortunately, we still have yet to experience the second wave whereby a low economic growth environment will cause a relatively slower (but still) deteriorating prices of economic assets. This will be where the real test will come as expectations of a quick rebound goes out of the window and markets gradually price in that this will be a drawn out period of much slower growth than what we have experienced in recent years.

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    Default Re: US mortgage crisis to cost $1.3 trillion worldwide

    today say $1.3 trillion loss.. then when presidential electoins draw nearers, then say write back $1.2 trillion.. ecolomy bloomings

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