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German Minister Sees $400 Billion Write-Offs

Feb. 11, 2008 (EIRNS)—Speaking at the G-7 meeting of finance ministers in Tokyo, Finance Minister Peer Steinbrueck said he and his minister colleagues were worried that write-offs from the subprime crisis could reach $400 billion dollars—considerably much more than what any official has dared to say, to date. Steinbrueck was not specific on the timeframe of that, but Mario Draghi, the governor of the Bank of Italy, warned over the Feb. 9-10 that the next 10-14 days will be crucial, since that is when banks have to announce their figures for 2007, and said about the extent of the exposure to subprimes, "The only thing we know is that it's big and we keep on discovering new dimensions to it."

Several leading European dailies carried reports today, forecasting considerable banking losses on several fronts: From London the Independent had a run down of troubled banks which will report their 2007 returns in the next two weeks, including Bradford and Bingley, the U.K.'s biggest buy to let lender which could be on its way to being another Northern Rock. Other banks are Barclays, Alliance and Leicester (another mortgage lender which has lost 45% of is share value in 2007 and could be yet another Northern Wreck), HBOS, Royal Bank of Scotland, and HSBC.

The same banks and a couple more are listed among those that are exposed to the coming drastic downgrading of CDOs, in a report in the Financial Times today: Citigroup, Wachovia in the U.S., Royal Bank of Scotland and Barclays in the U.K., UBS Dresdner Kleinwort, BNP Paribas, Societe Generale and Calyon in the rest of Europe. No surprise one meets the same banks, in a list of Thomson Financial, on the drastic drop up to 40% in market capitalization, since July 2007: HSBC, Banco Santander, UniCredit, Paribas, UBS, CS, Intesa, RSBC, Barclays, Deutsche Bank and Société Générale.