Wednesday, August 13, 2008

Bank Writedowns - Who has the money?

A recent posting over The Big Picture talked about the global bank writedowns being, to date, in excess of $500 Billion, and either half-way ($1 Trillion) or just one-quarter ($2 Trillion) finished.

My question to all you readers is simple: since the writedowns represent real dollars that have left the bank balance sheets and ended up elsewhere, where do you think most of it went?

  • Effectively free or reduced rent by unqualified home buyers?
  • Consumer goods purchases?
  • Home flippers with excessive profits?
  • Realtors (too many sales)?
  • Home builders?
  • Other?

What do you say?


The Confused Capitalist


David said...

I think the majority went to lawyers,bankers,homebuilders,mortgage brokers,etc.

Very little would have gone to home buyers.This includes flippers.

Frank the sales forecaster said...

The majority went to the homeowners. What kind of loan would have more fees than principle? Excess capital means that degraded credit standards and inducements (below cost of money teaser rates, etc) are required to get all the money "working." Businesses are slow to borrow money they don't need, so the excess capital had to be lent to less sophisticated borrowers (households.) Funny how too high interest rates can lead to too strong currency which leads to too high trade deficit which leads to too much capital which leads to a credit market meltdown and recession.