Lenders are also posting huge losses as the easy money lending spree that fueled the housing boom continues to unwind. This month alone many major banking companies including Citigroup, Merrill Lynch, Morgan Stanley and Bank of America have reported billions in losses on investments backed by mortgages.In his testimony last week, Bernanke told Congress that the losses from the current turmoil in the mortgage market could eventually approach those seen in the late 1980s, when the savings and loan industry collapsed under heavy wave of real estate defaults, some of them the result of fraudulent transactions.
This time around, bad mortgage debt may cost banks as much as $400 billion by the time the credit crisis is over, Deutsche Bank wrote in a research report Monday.
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