Today, Bloomberg News reported that 100 of the world’s biggest banks losses from the U.S. sub-prime crisis, and the ensuing credit crunch, crossed the $500 billion mark as write-downs spread to more asset types.

Further exacerbating the situation we now see that auction-rate securities have begun adding to the losses as regulators and prosecutors force banks to buy back bonds they’d sold to clients as safe investments.

• So, Is This Prediction Right? The International Monetary Fund (IMF) in an April 2008 report estimated banks’ losses at $510 billion.

• Or, Will This Horrific Predition Come to Fruition? Predictions have crept up since the IMF’s $500M number, with New York University economist Nouriel Roubini forecasting losses to reach $2 Trillion.

The collapse of the U.S. sub-prime mortgage market has weighed down banks worldwide with losses from declining values of securities tied to all types of home loans and commercial mortgages as well as leveraged-loan commitments.

The Gap: Banks and brokers have raised $353 billion of capital to cope with the write-downs. The gap between the losses and capital infusions, which stands at $148 billion, has regularly narrowed to about $80 billion as capital raising follows write-down announcements.

Tags: Subprime Losses

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