Before the subprime mortgage market collapsed, some top executives of mortgage and finance companies made a killing.
The bank said the funds had lost a lot of money by investing in the U.S. subprime mortgage market.
The problems began in the subprime mortgage market and they've been magnified by the way Wall Street packaged those loans.
That involved more than 100 regulatory initiatives to force banks to abandon their traditional lending standards and create the subprime mortgage market.
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That is how the subprime mortgage market exploded from 5% of all mortgages in 1994 to half of all mortgages by 2007.
The creeping way in which losses in the subprime mortgage market have emerged had made banks wary of extending credit to each other.
As the real estate market roared, FHA lending dropped to historic lows, only to rev back up once the subprime mortgage market bottomed out.
Just as the germ carried from America's subprime mortgage market is now infecting money markets elsewhere, so the housing downturn itself could spread globally.
Home foreclosures are also up as the subprime mortgage market continues to founder, with 223, 000 reported last month versus fewer than 140, 000 in February 2007.
The hearings come amid a imploding subprime mortgage market, scandalous corroboration between student lenders and university officials, and allegations of unfair practices by credit card companies.
For example, Chris Hayes points out, Ben Bernanke spent the duration of the housing bubble denying that there was anything amiss in the subprime mortgage market.
Obama said he wrote a letter to Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson warning them about the dangers of the subprime mortgage market.
The continent's major indexes were down an average 1.5% in Thursday morning trading, dragged down by financials as worries about hedge fund exposure to America's subprime mortgage market resurfaced.
Although the turmoil in the subprime mortgage market has created severe financial problems for many individuals and families, the implications of these developments for the housing market as a whole are less clear.
The Federal Reserve, lagging other central banks, pumped in extra money and then cut its discount rate to prevent a seizure of the financial system in the aftermath of the subprime mortgage market debacle.
The virtual shutdown of the subprime mortgage market and a widening of spreads on jumbo mortgage loans have further reduced the demand for housing, while foreclosures are adding to the already-elevated inventory of unsold homes.
But Paulson and other banking regulators sat tight until the subprime mortgage market imploded in the summer, bringing down with it a few hedge funds and, more significant, putting a virtual freeze on the fixed-income markets.
Paulson defended last week's decision by the Treasury to bail out Bear Stearns, an investment bank heavily invested in the subprime mortgage market, but would not say what might have happened had the government failed to step in.
As a result of this deterioration in loan performance, investors have increased their scrutiny of the credit quality of securitized mortgages, and lenders in turn are evidently tightening the terms and standards applied in the subprime mortgage market.
The latest speculation to circulate through the European market is that German state bank WestLB, which is already facing difficulties in the wake of a trading scandal, is also in serious trouble because of its exposure to America's subprime mortgage market.
And it's really pretty emotional as far as we can tell, which is lenders of other kinds of financial instruments - corporate loans, other kinds of loans, begin to look over their shoulder and say, oh, gee, did we do any of the strange things that the subprime mortgage market did.
Just as the trouble in America's housing market is a drag on the economy, the turmoil in the subprime-mortgage market weighs on the currency.
After all, hedge-fund investor John Paulson, now legendary for shorting the subprime-mortgage market and for betting on gold, remains a big gold bull.
What started in the subprime mortgage bond market earlier this year is filtering into the broader credit markets, but the nervousness is less a sign of deteriorating credit quality--defaults are at historic lows of 0.3%, according to Coffey--and more an oversupply issue.
At the heart of the trouble here is the housing market's subprime mortgage debacle.
The debasement of lending standards for the subprime market soon spread throughout the mortgage markets.
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WaMu has scrambled in the last few years to reduce its exposure to the mortgage market, and to subprime mortgages more specifically.
Without Fannie and Freddie's implicit guarantee of government support (which turned out to be all too real), would the mortgage-backed securities market and the subprime part of it have expanded the way they did?
But perhaps the most worrying thing for financial institutions holding mortgage-backed paper is not the subprime market itself, but the unnerving parallels with an even bigger one to which they are also exposed: leveraged loans to companies.
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