I base that on this picture:
(Click to see original big chart from dshort.com.)
Maybe even down to 5%. I dunno. Maybe things will rebound! Nobody knows anything. Which is why everyone is hording cash (or things they think are cash, like treasury bonds).
All banks are insolvent. BTW, the current crisis can be easily averted (for now) if the government buys any mortgage that any bank wants to sell, and then doesn't collect any interest for at least five years. And the government has to pay the FULL PRICE! All this crap about getting a "good deal" for the taxpayers is baloney. It's only by paying full price that the banks can at least claim to be solvent.
The current economic problem is hugely magnified by the ripple effect from the bad mortgages and all the secondary goofy paper like credit default swaps based on them.
If you (and by you, I mean the government, which means you) buy out those mortgages, then the ripple effect is fixed. Of course, everyone will still unwind many of the crappy other outstanding loans which will deflate the currency for awhile but this wholesale buyout would remove a big hunk of uncertainty from the markets. w00t.
There isn't the political will power to do that right now but that could change, especially if the government makes some "special" investment in BofA and Citigroup; that would give them the staff power they need to actually do all the paperwork to buy all of those mortgages.
Undoubtedly the mortgages would then be handed off to the "bad bank."
I'm pretty sure this will happen eventually, although things need to get even worse before that happens - governments never act proactively but only after things are so obviously bad that no one can argue that "immediate action must be taken."
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