Wednesday, January 2, 2008

The Potential for a Total Disaster

On Friday's marketplace, Felix Salmon let drop a number that not many people want you to hear. He said that there are three to four trillion dollars in losses that the financial sector has suffered that have, as of yet, not really been felt:

"At the moment the politics is no where near nationalization. They are quite keen to do anything but nationalization, which I think is a little bit shortsighted. And nationalization makes a lot of sense in this situation. What's quite clear is that right now they only have $350 billion to play with -- the second trench of the TARP money. And they haven't decided what they want to do with that until they really come up with a big strategic solution for the entire banking sector in the United States. And I have a feeling that when that bill comes out, then I think you might start beginning to see the second wave of capitulation, as it were, when people, really it start to sink in that there's three or four trillion dollars worth of losses just sitting in the financial sector, which someone is going to have to take."