The New York Times reports today that the nation's economic problems have spread well beyond the collapse of the subprime housing market:
"'Subprime was a symptom of the problem,' said James F. Keegan, a bond portfolio manager at American Century Investments, a mutual fund company. 'The problem was we had a debt or credit bubble.'”
The bursting of that bubble has led to steep losses across the financial industry. American International Group said on Monday that auditors found it may have understated losses on complex financial instruments linked to mortgages and corporate loans.
The running turmoil is also stirring fears that some hedge funds may run into trouble. At the end of September, nearly 4 percent of prime mortgages were past due or in foreclosure, according to the Mortgage Bankers Association...
And it is not just first-mortgage default rates that are rising. About 5.7 percent of home equity lines of credit were delinquent or in default at the end of last year, up from 4.5 percent a year earlier, according to Moody’s Economy.com and Equifax, the credit bureau.
About 7.1 percent of auto loans were in trouble, up from 6.1 percent. Personal bankruptcy filings, which fell significantly after a 2005 federal law made it harder to wipe out debts in bankruptcy, are starting to inch up.
Read the entire article.