Subprime Mess
Base10 read this article (and it's predecessor) at Nouriel Roubini's website. I've seen Roubini speak and he is a very smart guy, even though he seems to be constantly predicting an economic meltdown (eventually he'll be right). In fairness. he may have a point this time:

Suddenly markets and investors are discovering that many financial institutions were parking a large fraction of their asset in the level 3 bucket where they avoid using market prices to evaluate such assets but rather rely on “model valuations” and “unobservable inputs”. But now the forthcoming FASB 157 regulation will prevent them (unless heavy political lobby leads to a postponement of its implementation on November 15th) from playing such accounting tricks and force them to use market prices – when available even in illiquid market conditions – to price these assets.

And guess what now? New reliable estimates suggest that using these market prices – rather than level 3 model gimmicks - will lead to losses of another $100 billion on top of hundreds of billions of subprime losses. And some market participants are already talking – quite realistically – about total losses from this credit disaster in the $500 billion range.

The scary thing here is that Roubini is not the most pessimistic analyst. Bill Gross, chief investment officer of Pacific Investment Management Co. predicts losses of up to $1 trillion. Ouch!
- posted by Base10 @ 11:40 AM