6. it is possible that some large regional or even national bank that is very exposed to mortgages, residential and commercial, will go bankrupt.
7. once a severe recession is underway a massive wave of corporate defaults will take place.
8. the fall in stock markets – after the late January 2008 rally fizzles out – will resume ...
9. a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices will ensue leading to a cascading and mounting cycle of losses and further credit contraction.
Panic, fire sales, cascading fall in asset prices will exacerbate the financial and real economic distress as a number of large and systemically important financial institutions go bankrupt. In this meltdown scenario, U.S. and global financial markets will experience their most severe crisis in the last quarter century.
http://www.rgemonitor.com/blog/roubini/242290
Cover story from Business Week, January 31, 2008:
Brace yourself: Home prices could sink an additional 25% over the next two or three years, returning values to their 2000 levels in inflation-adjusted terms. That's even with the Federal Reserve's half-percentage-point rate cut on Jan. 30.
While a 25% decline is unprecedented in modern times, some economists are beginning to talk about it. "We now see potential for another 25% to 30% downside over the next two years," says David A. Rosenberg, North American economist for Merrill Lynch, who until recently had expected a much smaller slide. http://www.businessweek.com/magazine/content/08_06/b4070040767516.htm
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