Goldman sees $1.2 trl global credit loss

Goldman Sachs forecasts global credit losses stemming from
the current market turmoil will reach $1.2 trl, with Wall Street accounting for
nearly 40% of the losses.

U.S.
leveraged institutions, which include banks, brokers-dealers, hedge funds and
government-sponsored enterprises, will suffer roughly $460 bln in credit losses
after loan loss provisions, Goldman Sachs economists wrote in a research note
released late on Monday.

Losses from this group of players are crucial because they
have led to a dramatic pullback in credit availability as they have pared
lending to shore up their capital and preserve their capital requirements, they
said.

Goldman estimated $120 bln in write-offs have been reported
by these leveraged institutions since the credit crunch began last summer.

“U.S.
leveraged institutions have written off less than half of the losses associated
with the bursting of the credit bubble,” they said. “There is light
at the end of the tunnel, but it is still rather dim.”

Of the cumulative losses expected by these leveraged
players, bad residential home loans will represent about half, while
poor-performing commercial mortgages will represent 15% to 20%.

The rest of the losses will come from credit card loans, car
loans, commercial and industrial lending and non-financial corporate bonds,
Goldman economists said.

Facing more credit losses, leveraged institutions have
raised about $100 bln in new capital from domestic and foreign investors and
reduced dividend payouts. This amount is more than three-quarters of the
write-offs to date, the report said.