$500

NEW YORK - Goldman Sachs economists expect a total of $500 billion in residential mortgage credit losses, a renewed slowdown in economic activity after the near-term boost from fiscal stimulus, and no monetary policy tightening in 2008 or 2009, according to a research note from the firm.

Despite a setback in recent days, many financial market indicators have recovered substantially since the Bear Stearns/JPMorgan Chase & Co deal in mid-March, Goldman Sachs chief U.S. economist Jan Hatzius said.

Still, "we think that overall mortgage credit losses will end up being larger than generally believed," Hatzius said.

"Excess supply in the housing market is still growing; home prices are already falling at rates that are very rapid by the standards of previous housing downturns around the world; and U.S. loan-to-value ratios are much higher than in those previous downturns," he said.

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