Re: End of the Credit Crises
[quote] You see where this is going. Under banking regulations, Bank needs $1 in the vault for every $10 that Bank lends out. If Bank’s $500,000 mortgage is worth $100,000, that translates to $4,000,000 that Bank can no longer lend out. [/quote]
I don’t think these numbers are right. If he is refering to FRB, then he is mistaken in thinking that mortgages are allowed as reserves for banking accounts. Anyways, it cannot be good for banks to lose $200,000 it a `partial default’, but it may be better than more foreclosures.