Credit-Market Losses May Cut Lending as Much as $2 Trillion, Goldman Says

[Purveyor]

Source: Bloomberg News

Nov. 16 (Bloomberg) -- The slump in global credit markets is likely to force banks, brokerages and hedge funds to cut lending by $2 trillion, triggering the risk of a ``substantial recession'' in the U.S., according to Goldman Sachs Group Inc.

Losses related to record U.S. home foreclosures using a ``back-of-the-envelope'' calculation may be as high as $400 billion for financial companies, Jan Hatzius, chief economist at Goldman in New York wrote in a report dated yesterday. The effects may be amplified tenfold as companies that borrowed to finance their investments scale back lending, the report said.

``The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized,'' Hatzius wrote. ``It is easy to see how such a shock could produce a substantial recession'' or ``a long period of very sluggish growth,'' he wrote.

Goldman's forecast reduction in lending is equivalent to 7 percent of total U.S. household, corporate and government debt, hurting an economy already beset by the slowing housing market. Wells Fargo & Co. Chief Executive Officer John Stumpf said yesterday that the housing market is the worst since the Great Depression.


Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=aIjFhqV9OlmA&refer=us

[marmar]

1. Everything old is new again....

:scared:

[bemildred]

2. Let me guess, Goldman wants a government bailout. nt

[BB1]

3. I've come to the point where all the fuzzy math

is spinning before my eyes. I'll go back to the ranch and have another beer.

Goldman can say what he wants, I'll double it!