Tuesday Morning: Wall Street Braces for Next Chapter of Subprime Meltdown

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Good morning -- to those of you reading this on the East Coast. Strong piece in this morning’s New York Times on Wall Street’s worries about the next shoe to drop in the subprime collapse: who bought bonds backed by subprime mortgages, and how much money did they lose?

‘On Wall Street, the impact could be far more significant: It could force banks, hedge funds and pension funds to acknowledge substantial losses, which had been tucked away in complex investment vehicles that are hard to evaluate. In turn, that could limit the money available for mortgage lending.

More: ‘Yesterday, two hedge funds operated by a division of Bear Stearns, an investment bank that is a dominant player in mortgage bonds, fought for their survival as three lenders — Merrill Lynch, Citigroup and JPMorgan Chase — asked Bear Stearns to put up more capital.

From Janet Tavakoli, president of Tavakoli Structured Finance: “The reason people are watching this carefully is because they’re wondering whether this is going to lead to others doing the same, or will this be contained.”

Comments? Predictions? Does this blow over or get ugly?
Photo Credit: Reuters