An Overwhelming Risk of Systematic Shock
An article published on Bloomberg takes a look at the risk of systematic shock that second mortgage loan losses are posing. According to the article:
There’s a greater than 50 percent probability that the financial system “will come to a grinding halt” because of losses from mortgages, Gregory Peters, head of credit strategy at Morgan Stanley, said.
The risk of systemic shock from the current subprime meltdown is quite large in the near term, Peters said. “It’s an overarching concern that we have,” he said.
Losses stemming from the subprime mortgages have caused a seizure of a lot of other markets, especially the securitization market, Peters said.
“While the near-term concern is the systemic shock of the subprime-related losses, the medium- and long-term concern is the impact on the average consumer,” Peters said. “The ultimate irony here is that the U.S. consumer now needs readily available capital more easily than ever, but they’re going to have the most difficult time getting it.”
The statistics are frightening; we are more likely to have a financial freeze-up than we are to get through this crisis without such a disaster. At this point, people need to stop ignoring the facts and prepare themselves for what may turn into the next economic disaster.
November 16, 2007 | Filed Under Second Mortgage
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