By Dr. Michael Lim Mah-Hui
Philippine Daily Inquirer
First Posted 03:04am (Mla time) 03/30/2008

IT has been nine months since the subprime mortgage crisis began. In the initial round of writedowns for the third quarter of 2007, banks placed their losses at less than $30 billion. Four months later, banks and securities houses increased the amount to more than $150 billion. And the end is not in sight.

Like falling dominoes, credit cards, auto loans, student loans, Alt A mortgages, credit default swaps, debt auction markets, monolines (bonds insurers) and leveraged buyouts are beginning to go sour.

We are still counting the costs of the ongoing crisis. Estimates range from $400 billion to $1 trillion as the crisis spreads to other financial products. At $1 trillion, this represents 8 percent of the US gross domestic product (GDP) or the total capital of US banks, (recognizing that a portion of this loss is borne by non-US banks and investors). By comparison, the US government spent some $200 billion or about 3 percent of GDP to sort out the savings and loans crisis of the late 1980s.

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