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    • Wed Oct 24th 15:21 PM | Rating: 0 0
      Commented on:
      Too Many Zeroes For Paul Krugman
      Enter your comment hereThe losses don't need to be on banks balance sheets entirely. The losses are also on homeowners' balance sheets. When someone pays $600,000 for something that's worth $350,000, he has a $250k loss on paper by having overpaid. After s/he is done paying mortgage interest over 30 years, they effectively paid $540k more than they had to. $540k they could have spent on consumer goods, investments, or other productive assets.

      And don't forget that banks losses aren't limited to the summation of what Morgan Stanley, JPM, BAC and Citi are willing to fess up to this quarter. There's 8000 other banks in this country. And thousands of warehouse lenders. And don't get me started on the SIVs.

      So yes, the biggest asset class in the world US Real Estate will be worth trillions less over the next few years (unfortunately it can't be repriced overnight). Sucks for everyone who overpaid and every lender looking for collateral.
      View article »
    • Wed Oct 24th 15:21 PM | Rating: 0 0
      Commented on:
      Too Many Zeroes For Paul Krugman
      Enter your comment hereThe losses don't need to be on banks balance sheets entirely. The losses are also on homeowners' balance sheets. When someone pays $600,000 for something that's worth $350,000, he has a $250k loss on paper by having overpaid. After s/he is done paying mortgage interest over 30 years, they effectively paid $540k more than they had to. $540k they could have spent on consumer goods, investments, or other productive assets.

      And don't forget that banks losses aren't limited to the summation of what Morgan Stanley, JPM, BAC and Citi are willing to fess up to this quarter. There's 8000 other banks in this country. And thousands of warehouse lenders. And don't get me started on the SIVs.

      So yes, the biggest asset class in the world US Real Estate will be worth trillions less over the next few years (unfortunately it can't be repriced overnight). Sucks for everyone who overpaid and every lender looking for collateral.
      View article »
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