According to Agence France-Presse:
The International Monetary Fund said Tuesday the worldwide losses stemming from the US subprime mortgage crisis could hit 945 billion dollars as the impact spreads in the global economy.
The IMF, in a particularly stark biannual report, said that falling US housing prices and rising delinquencies on the residential mortgage market could lead to losses of 565 billion dollars.
Combined with other categories of loans originated and securities issued in the United States related to commercial real estate, the consumer credit market, and corporations "increases aggregate potential losses to about 945 billion dollars," it said.
"The crisis is spreading beyond the US subprime market -- namely to the prime residential and commercial real estate markets, consumer credit, and the low- to high grade corporate credit markets," the IMF said in releasing its Global Financial Stability Report (GFSR).
While the US remains the epicenter, "financial institutions in other countries have also been affected, reflecting the same overly benign global financial conditions and to varying degrees -- weaknesses in risk management systems and prudential supervision."
It was the first time the multilateral institution has made an official estimate of the global losses suffered by banks and other financial institutions in the credit squeeze that began eight months ago in the US, amid rising defaults on subprime, or high-risk, home loans.
In other words, this is a crisis of extreme magnitude. John McCain's response, once again? From the Los Angeles Times:
In a speech at a small printing business in Santa Ana, the presumptive Republican nominee said he was "committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."
McCain cited the $30-billion plan by New York Sen. Hillary Rodham Clinton to aid homeowners and communities threatened by foreclosures, saying that it sounded "very expensive" and that he would "like to know how it's paid for."
If that simplistic answer sounds like it came from someone who has no idea what he's talking about, there's a reason. Of course, he has Greenspan's book. Not to mention Greenspan's endorsement. Which should be of comfort to anyone who enjoys the fair and balanced election coverage by the NBC family of networks. Not to mention anyone who appreciates Greenspan's role in helping create the crisis!
"I will not play election-year politics with the housing crisis," he said at C&H Letterpress Inc. in Santa Ana, addressing a group of Latino small-business leaders. "I will evaluate everything in terms of whether it might be harmful or helpful to our effort to deal with the crisis we face now."
Although the Democrats seem to disagree.
But one of McCain's potential Democratic rivals in the general election, Sen. Hillary Clinton, said McCain's reluctance to bail out banks and borrowers in trouble sounded like Herbert Hoover, the Republican president in office at the start of the Great Depression.
Well, at least McCain can claim historic precedent for doing nothing!
And from the Los Angeles Times
Campaigning in Greensboro, N.C., Sen. Obama of Illinois ridiculed Sen. McCain of Arizona for offering no concrete plan to fight the wave of defaults that has shaken the economy.
"We've been down this road before," Obama said. "It's the road George Bush has taken . . . for the last eight years. It's the idea that government has no role at all in solving the challenges facing working families -- that all we can do is hand out tax breaks for the wealthiest few and let the chips fall where they may."
In fact, he's so clueless that when appearing before the Wall Street Journal editorial board, he took along his economic adviser, Phil Gramm. That would be the same Phil Gramm whose sterling Senate career included helping to cause the subprime crisis. As Paul Krugman explained:
Seriously, the Gramm connection tells you all you need to know about where a McCain administration would stand on financial issues: squarely against any significant reform.
Greenspan and Gramm. Doing nothing or doing something. McCain or the Democrats. A tough choice...