Sunday, November 11, 2007

SUBPRIME LOANS | U.S. Problems Exported

Nov. 11, 2007–Foreigners holding U.S. securities are losing money because of the decline in the value of the dollar. Now, it seems, many of them may find they are also losing money on the securities themselves.

Barclays and the Royal Bank of Scotland appear to be caught in the web of Collateralized Debt Obligations. It was an RBS analyst, previously cited, who put the magnitude of the loss from subprime debt at $250-$500 billion. A Deutschebank analyst's forecast is more precise at $300-$400 billion. These estimates are larger than the S&L losses in the 1980s. This time round, the rest of the world will be sharing the pain.

I am using several public sources to generate a side-by-side comparison of the Savings and Loans and subprime crises. It may be found here. This is a work in progress and will be updated.