Second, some of the data points and "expected losses" are comical. For example, the banks are expected under the "more adverse" situation to believe that prime mortgage losses will not exceed 4%, and ALT-A (liar loans and Option ARMs) will not exceed 13%. HELOC loss (most of which is unsecured!) is expected not to exceed 11%.
Commercial Real Estate, in total, is not expected to produce more than a 12% loss.
If these numbers have any sort of credibility then this paper should be trading at 85 cents or so.
The truth is that you can't find a bid for anything over 40 cents, and the reason is that for those pools where the internals are exposed the known loss figures are high enough to make the actual "today" value of that paper 40 cents, not 85 or 90.
I suspect we're looking at the complete insolvency of most of the banking system by 2011. We would be much better off in just allowing them to die now, and spread what's left of their capital out to work. Until then, I think we're stuck in a Japan-style deflation.