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Extremely scary math - U.S. banks are faced with losses of up to $1.375 trillion - close to their total capital

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Mortgage-backed securities in circulation total $11,000 billion. US real estate is overvalued by 20 to 30 percent. If a quarter of the wealth of US households vaporizes, that represents $2,750 billion worth of debt that will probably not be repaid and will become losses for the financial system. The total capitalization of United States' banks, government agencies and savings banks amounts to $1,681 billion. Their direct exposure to mortgage securities totals $5,591 billion, or half of the outstanding amount. They are, consequently, potentially faced with write-downs of up to $1,375 billion - close to their total capital. These figures do not take into account possible losses in other credit sectors: consumption, auto loans and commercial real estate. The central banks, lenders ...

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