by Calculated Risk on 11/16/2007 10:40:00 AM

From Bloomberg: Goldman Sees Subprime Cutting $2 Trillion in Lending

The slump in global credit markets may force banks, brokerages and hedge funds to cut lending by $2 trillion and trigger a ``substantial recession'' in the U.S. ...

``The likely mortgage credit losses pose a significantly bigger macroeconomic risk than generally recognized,'' [Jan Hatzius, chief U.S. economist at Goldman] wrote. ``It is easy to see how such a shock could produce a substantial recession'' or ``a long period of very sluggish growth,'' he wrote.

Hatzius also wrote (not in article) that Goldman Sachs' working assumption is home prices will "fall 15% peak to trough ... if the economy stays out of a full-blown recession".