November 12, 2007 (LPAC)-- A new report out today from Deutsche Bank, says that bank losses from the continuing collapse of the subprime mortgage securities could eventually reach $300 billion to $400 billion worldwide. Wall Street alone will be forced to write down as much as $130 billion, with the rest of the losses coming from smaller banks and investors in mortgage-related securities. Already last month, Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley each announced write-downs in the ten's of billions of dollars, led by Citigroup with write downs of more than $40 billion. The author of the report, Mike Mayo, expects total write downs at HSBC, UBS AG, Royal Bank of Scotland Group Plc and Barclays Plc to be "ballpark $5 billion or so" each. This could cause major problems for banks-- HSBC, for example, has a $45 billion mortgage services business, and only $2.1 billion in loss provisions. Mayo apparently makes no estimate of what Deutsche Bank's own losses might be.

According to the report, subprime borrowers are likely to eventually default on 30 percent to 40 percent of all outstanding debt. For a $1.2 trillion subprime mortgage market, that figure could easily approach $500 billion. This year alone, having already announced losses totaling over $40 billion, banks and brokers may have to write off an additional $25 billion, for a total of between $60 and $70 billion. These figures could well be much larger, since, as Mayo admits, he was going by "seat-of-the-pants" calculations, based on published figures, which in many cases have proven to be-- shall we say-- "conservative."

In addition, loss rates on about $200 billion of securities based on derivatives linked to subprime debt, will climb as high as 80%, according to the DB report, which would amount to $160 billion. Coverage by Bloomberg notes that a Lehman Brothers' report from last week found that Commercial banks, government- chartered firms Fannie Mae and Freddie Mac, and mortgage and bond insurers will be the most affected by mortgage losses. "We're not out of the woods yet," one fund manager told Bloomberg. "There are more losses to be taken and there's more negative news to come."

This latter analysis however, fails to acknowledge that crucial historical interventions do in fact take place. If LaRouche's Home Owner's and Bank Protection Act were promptly passed, the speculative hedge funds who started this disaster would be the ones biting the dust, and not our far more necessary institutions. Protecting homeowners and banks now would change the entire universe in fact, as outcomes currently considered hopes in vein, would then become possible.