A front page article in the Washington Post told readers that the analysts it relies upon as sources had not expected the large losses being reported by banks for the 4th quarter. It is hard to understand how professional economic and financial analysts could still be surprised by the size of bank losses. The basic story is straightforward. Housing has lost close to $6 trillion in value over the last two and a half years. This is leading to massive losses not only on mortgage debt and derivative instruments, but also on car loans, student loans credit card debt and other forms of consumer credit, since more than ten million homeowners no longer have any equity that can serve as backdrop to pay these loans in bad times. The Post might try to rely more on experts who are not repeatedly surprised by events that they should have expected.
--Dean Baker