There are 75 million homeowners in the United States. There are 882,000 sub-prime loans with a value of $179 billion that will reset in 2008. Dr. Christopher Cagan estimates that these troubles will turn into 1.1 million reset-based foreclosures of $326 billion in mortgage loans. This will further translate into $112 billion of non-recovered losses over a period of a few years. These figures would compare with a $13 trillion US annual GDP and about $2 trillion of annual mortgage issuances. (We don’t know the level of Dr. Cagan’s independence, but he appears to be widely quoted.)

All these figures suggest a manageable problem unless government incompetence were to dry up liquidity for an extended period of time. Of course we have seen that happen before.

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