Monday, December 17, 2007

Now that's a Credit Crunch!

According to a recent edition of The Economist, "back-of-the-envelope calculations from Goldman Sachs suggest that if banks suffer a $200 billion loss on subprime mortgage but want to keep their capital ratios at an average level of 10 percent, that would stifle lending by a whopping $2 trillion".

In other words, for each dollar of loan losses, banks might have to reduce loans by a multiple of ten times unless it can replenish its capital base.

CFO Magazine referenced a Bloomberg report which suggested that Wall Street's largest financial institutions alone could wind up writing down as much as $130 billion. The "largest" suggests that the number may not include some of the not so large U.S. financial institutions that have or will soon report subprime related losses. The same article suggests that the losses worldwide may be $300-400 billion!

Need help finding the right lender that may not be pulling in its horns as a result of the credit crunch? Read "Matchmaking for Business Loans" and give me a call!

Tags : credit crunch , business loans , CFO Magazine , capital ratios , subprime losses

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