UK Telegraph: Banks "set to call in a swathe of loans"

Today the UK Telegraph quotes a Lombard Street Research report warning that the US faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans:

The group said the fast-moving crisis at two Bear Stearns hedge funds had exposed the underlying rot in the US sub-prime mortgage market, and the vast nexus of collateralised debt obligations known as CDOs.”Excess liquidity in the global system will be slashed,” it said. “Banks' capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing.”

US property writer Paul Muolo described the Bear Sterns crisis as the “subprime Chernobyl.”

 

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