Is this true
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.
According to the study by Greenlaw, Hatzius, Kashyap and Shin (pdf), 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.
Translation: Truthout French language editor Leslie Thatcher.
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