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Reply #42: Goldman analysts: Credit crisis only halfway over [View All]

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Mojorabbit Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Dec-08-08 03:31 PM
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42. Goldman analysts: Credit crisis only halfway over
Goldman analysts: Credit crisis only halfway over
Monday December 8, 12:21 pm ET
Goldman analysts predict that banks are only halfway through a 3-year credit cycle

NEW YORK (AP) -- Back in April, Goldman Sachs CEO Lloyd Blankfein said that the credit crisis, if it were a football game, was "probably in the third or fourth quarter." Eight months later, Goldman analysts are saying the current credit cycle has only now reached half-time.

Investment research analysts at Goldman issued a report Monday that said banks are "only halfway through a three-year credit cycle" -- indicating how much more prolonged than predicted the industry's struggles will be.

Because there is no national precedent for the housing market downturn and ensuing collapse in credit, one must examine similarly large home price drops and unemployment spikes that happened on a regional basis, wrote the analysts, led by Richard Ramsden. In those cases, the report said, reserve building by banks lasted three years, with reserves to loans reaching 3 percent.

Now, about 18 months into the current crisis, the industry's reserves have doubled to 2 percent, and banks have taken half of the estimated $1.8 trillion in losses related to U.S. credit, the analysts said.
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