Oct
11
“And I’ve made some estimate that on top of the 300 (billion), $400 billion of write-downs from subprime, this walk-away phenomenon is going to give you at least, even in the best of circumstances—it’s good that only one out of five people that are underwater—only 20 percent of them are going to walk away. You get another additional $400 billion losses from the financial system. If the number is 50 percent, meaning half of the people underwater eventually walk away, you get a number of $1 trillion. That’s because you wipe out most of the capital of the U.S. banking system. But even in the most conservative assumption of one out of five, you get another $400 billion of losses on top of the $500 billion already written down. So the effects on the financial system of this particular thing are going to be absolutely disastrous.”
Nouriel Roubini — Council on Foreign Relations
