Credit losses from mortgage crisis could hit $400B
Add a Comment 
Credit losses, foreclosures, Goldman Sachs, mortgage market March 1st, 2008NEW YORK — Total credit losses from the mortgage meltdown could total nearly $400 billion, with about half that amount being borne by U.S. financial institutions, according to new research released Friday.
The overall economic impact in the housing market could be much greater, however, as financial institutions — finding their capital depleted — pull back from lending, resulting in a contraction of nearly $2 trillion in balance sheets.
The new figures are much higher than preliminary forecasts by the Federal Reserve and others, last year, of about $150 billion in direct impact.
The new research finds lending to households, businesses and other entities would decline by about $900 billion as a result of the mortgage meltdown. Goldman Sachs economist Jan Hatzius and others presented the findings to the U.S. Monetary Policy Forum sponsored by Brandeis University and the University of Chicago.
More broadly, the mortgage market troubles — rising foreclosures, problems with mortgage-backed bonds and other securities — could cut U.S. economic growth by 1 to 1.5 percentage points over four quarters, the research says. That figure does not take into account additional impact from the decline in the housing market, including declining home construction and sales of related items.
Tags: Credit losses, foreclosures, Goldman Sachs, mortgage market
