Comment: Subprime Mortgage Woes Could Have Knock-on Effects - As Major Players Face Rating Downgrades, Observers Wonder If The Problems In The Credit Market Will Cascade Into The Equity Markets.

Banker, The, August, 2007

All eyes are turned towards the credit markets as the bears wait for the wheels to come off. It is the subprime mortgage markets that have drawn most attention, but other bad news may be waiting in the wings.

In the wake of subprime woes in the US, one after the other, the three major rating agencies cut their ratings on hundreds of collateralised debt obligations backed by mortgage loans. Last month, Bear Stearns, supposedly one of the smartest players in the subprime market, had the uncomfortable task of admitting that two of its hedge funds, heavily invested in subprime bonds are now practically worthless.

In July, JPMorgan posted decent Q2 returns but disclosed that it had had to double provisions for credit losses related to retail mortgages....

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