Just last week, Treasury Secretary, Hank Paulson's, declared during a Bloomberg interview that, "Subprime issues will be largely contained." So far, his comment rings true provide we're talking about a very large container. Mortgage lender American Home Mortgage Investment (AHM), whose clients are considered to be prime or near-prime credit histories warned investors yesterday that it had been forced to drastically write down the value of its loan and security portfolios, thus triggering margin calls on its credit facilities. Barclays PLC (BCS), UBS AG (USA), Bear Stearns (BSC) and Bank of America (BAC) were among the banks listed in its filings with the SEC that had provided a combined $9.7 billion in loans to back American Home's mortgage underwriting efforts. When shares finally opened for trading this afternoon after being halted all day yesterday, the first tick was $1 and change--a nearly 90-percent plunge from Friday's closing price. In more "containment" news, after the close of trading in the U.S., The Wall Street Journal reported that Bear Stearns (BSC), the Wall Street philanthropists who had already been forced to shutter two other hollowed-out hedge funds is now struggling to contain (there's that word again) "big losses in a third fund" that is believed to control assets previously worth roughly $900 million in other mortgage related investments. The Journal story says that this fund, the Bear Stearns Asset-Backed Securities Fund, has just "a small slice" of subprime exposure. Using deductive logic, that would mean that this is indeed spreading. Fortunately, just within our own galaxy.
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