Professor Roubini says that even at the low end of the estimates the potential impact on the rest of the economy is massive. “If you have a $200bn loss, that reduced your capital by $200bn, you have to reduce your lending by 10 times as much,” he explains. “So you could have a reduction of total credit to the economy of two trillion dollars”. The professor predicts that a reduction of credit on that scale will trigger a recession in America which could become global as the contagion spreads through the banking system worldwide.

BBC NEWS | Business | City of debt shows US housing woe