Goldman Sachs's latest calculations (*), which suppose that American house prices will eventually fall by 25% from their peak, suggest that total losses will reach just over $1.1 trillion.

That suggests a serious problem, but not a catastrophic banking crisis.

Unfortunately, things are not quite so simple.

It would not take many homeowners to walk away from their debts for the losses to grow rapidly.

(*) About that estimate, and a more pessimistic alternate view:

In reaching its conclusion, Goldman estimated a peak-to-trough house price fall of 25 per cent. In his comments on the FT’s forum, Professor Roubini suggests that, after price falls of 20 per cent from the peak, losses on mortgages could be as much as $1,000bn. With a 40 per cent fall, they could be $2,000bn. He adds another $700bn for other losses, to reach total financial sector losses of close to $3,000bn, or about 20 per cent of GDP.

So how does Roubini reach these much higher figures? The difference between him and Goldman is not so much in assumptions about the house price fall: 25 per cent for Goldman Sachs and 20-40 per cent for Roubini. Both also estimate that lenders would lose half of the loan value after repossession. But Goldman believes that just 20 per cent of households in negative equity would default, while Prof Roubini believes 50 percent might default.