Is $700B Gonna Cover It?

From the WSJ:

In a research note Thursday, Goldman Sachs estimated that there are probably about $1.15 trillion in distressed assets in the market.

That number is higher than the figure proposed by the Treasury, but it represents the face value of the mortgages. Since the discussion focuses on delinquent or foreclosed loans, the government should be getting a discount. Paying as high as 70 cents on the dollar would translate into $1 trillion in buying power for $700 billion.

However, Goldman noted that its numbers should be taken with a grain of salt. “They could either be too optimistic or too pessimistic. On the one hand, further home price declines would likely result in a further increase in the amount of troubled assets. On the other hand, more than half of all delinquent (residential) mortgages are less than 60 days past due. Only some of these are ultimately likely to default,” the economists said.