Credit crunch set to continue

by Richard Kilner

Story link: Credit crunch set to continue

Financial analysts believe that the credit crunch is set to rumble on for some time yet.

To date the credit crisis, caused by the US subprime mortgage crisis, has cost financial institutions around the globe $150bn.

However, Oppenheimer & Co in New York believe that this figure could leap by $75bn in the near future.

The reasoning behind this bleak assessment is that some banks’ mortgage bets are backed up by bond insurance companies, who themselves are suffering difficulties.

Therefore, it is not guaranteed that the bond insurers will be able to pay up as and when required.

Such a situation would not help ease the tight credit markets, and could see the looming US recession hit deeper than previously expected.