Banking Crisis Will Be Much More Severe Than Expected Reaching $1.6 Trillion in Losses

This weekend a story appears in the Swiss Sunday newspaper SonntagsZeitung. It is based on a confidential report from Bridgewater Associates, one of the world's largest hedge funds.

Below is our translation from the German, and the original with a link. We find it amusing that stories of this magnitude from American sources are reaching us via Europe.

Based on these estimates we are about one-fourth of the way through this financial crisis.


SonntagsZeitung
Explosive Study: The banking crisis will be much worse

Westport (USA) - The expected losses from the financial crisis will be 1,600 billions of dollars. ($1.6 trillion). So far financial institutions have only declared 400 billion. This pessimistic forecast comes from a confidential study by Bridgewater Associates, the second largest hedge fund in the world.

"We are facing an avalanche of bad assets," says the study. The biggest losses have been in the U.S. banks. "We have significant doubts that the financial institutions will be able to raise new capital in order to cover the losses," says the report.

Bridgewater Associates enjoys a first-class reputation in financial circles, and several central banks are among its customers. "Bridgewater are on the pessimistic side," says George Magnus, Senior Economic Adviser at UBS in London, "but they have been absolutely right."


Original Story in German


Brisante Studie: Die Bankenkrise wird noch viel schlimmer

Westport (USA) - Die zu erwartenden Verluste aus der Finanzkrise werden sich auf 1600 Milliarden Dollar summieren. Davon haben die Finanzinstitute bisher erst 400 Milliarden bekannt gegeben. Die pessimistische Prognose stammt aus einer vertraulichen Studie von Bridgewater Associates, dem zweitgrössten Hedge- Fund der Welt.

«Wir stehen vor einer Lawine notleidender Vermögenswerte», heisst es in der Studie. Die grössten Verluste stünden den US-Kreditbanken bevor. «Wir haben grosse Zweifel, dass es den Finanzinstituten gelingen wird, genügend neues Eigenkapital aufzunehmen, um die Verluste zu decken», schreiben die Autoren.

Bridgewater Associates geniessen in Finanzkreisen einen erstklassigen Ruf, mehrere Notenbanken zählen zu ihren Kunden. «Bridgewater sind auf der pessimistischen Seite», sagt George Magnus, Senior Economic Adviser der UBS in London, «aber sie haben absolut Recht.»