We are now way beyond sub-prime. NAB says that it is suffering a 55 per cent loss on American housing loans – an event that has never happened in the history of a developed country in recent memory. This is an unprecedented event and means that the cost of bailing out the US financial system is now far beyond the highest estimates.
The Business Spectator must not read Brick Oven. We’ve said for a year that prices will be down 30%, the banks had $10 trillion in mortgages, and will thus lose a large percentage of $3 trillion as homeowners walk away from upside-down loans. The $1 trillion number is not credible. It is not that complicated.
This statement from the National Australian Bank could trigger more bank failures next week.