US mortgage crisis goes into meltdown

Leave it to a Brit paper to lay out the difficulties in the sub-prime housing market. This is the section of the market that makes loans to “high risk” individuals. 22 sup-prime lenders have gone bankrupt in the last two months. This is a good definition of meltdown. As expected (at least by me, if not by the “powers that be”) the new danger is that loans that are not in the sub-prime market begin to struggle. The article confirms this: “Rating agency Standard & Poor’s is shifting its focus to the tier of debt above sub-prime, eyeing loans covering people viewed as better credit risks but who lack the steady income needed for prime status.” So the difficulties spread slowly from the sub-prime lenders to the “tier of debt above sub-prime.” This is exactly how we expected the housing bust to work itself out. We are still at the beginning.

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