US Mortgage-Related Assets

Mortgage-Related Assets

U.S. banks have sustained $758 billion in credit losses since the crisis began. Many of those losses stemmed from mortgage-related investments that declined with the collapse in the housing market.

Home prices in 20 U.S. cities fell 18.2 percent in November from a year earlier, the fastest drop on record, according to the S&P/Case-Shiller index.

“Unfortunately, the prospect of stable home prices remains many months in the future,” Greenspan said in his speech. “Many forecasters project a decline in home prices of 10 percent or more from current levels.”

Greenspan estimated the collapse in housing, coupled with the steep drop in equity prices worldwide, had wiped out more than $40 trillion of wealth, equivalent to two-thirds of last year’s global gross domestic product. U.S. stocks tumbled to a three-month low yesterday, extending a decline that began overseas.

“Certainly, by any historical measure, world stock prices are cheap,” Greenspan said. “But as history also counsels they could get a lot cheaper before they turn.”