Subprime Crisis 'Will Cost Banks Up to Pounds 147bn' ; FINANCE
Goodway, Nick, The Evening Standard (London, England)
BANKS are facing up to $300 billion (Pounds 146.6 billion) of losses from the subprime credit crisis over the next 18 months according to Guy Hands, one of Britain's top private-equity chiefs.
So far, the top US and European banks have declared losses on subprimerelated debt totalling $52 billion.
In his quarterly letter to partners in his Terra Firma private- equity investment firm, Hands said he did not believe the credit crunch would be a mere blip.
He warned: "Many more people will get fired, and some, most likely in the US, will go to jail for 'fiddling' the books." For the private-equity market this means not only that there will be far less debt available to do deals, but the price of that debt will be much higher, said Hands.
"Doing large buyout deals in the first half of 2008 will be far more difficult than in the first half of 2007," he said.
At the same time, the subprime crisis is now pushing ripples out into the wider economy. As HSBC reported this week, some US states are already suffering a deterioration in people paying off their credit cards or car loans.
Hands said the UK and US economies have been driven by consumers in recent years who are now facing a brick wall.
"The ensuing reduction in consumer spending will mean that recessions are inevitable, but will be probably delayed until after the US elections by the lowering of interest rates." He also warned that the world political climate is becoming increasingly unhelpful as "localisation not globalisation is becoming the driver as people worry about issues closer to home which will need funding". …