Tough to calm those subprime jitters

Steve Henn Aug 1, 2007


Scott Jagow: The nervousness on Wall Street and elsewhere still has to do with home loans and the credit market. Steve Henn has the latest.

Steve Henn: This morning, Treasury Secretary Henry Paulson tried to calm investors’ fears. Speaking from China, Paulson says the credit crunch is contained to the subprime mortgage industry.

But Greg McBride, an economist at, says that’s little comfort — since no one knows for sure how long it will take before the mortgage industry’s problems are put to bed.

Greg McBride: The fact is that even Ben Bernanke himself said the subprime sector is going to get worse before it gets better.

And it got worse yesterday. American Home Mortgage announced it was out of cash and would have to start selling off assets. Then Bear Sterns said it would prevent investors from withdrawing about $850 million from one of its troubled hedge funds.

McBride: Much like when children jump off the furniture and do risky behavior without fully evaluating the consequences.

Even the smartest institutional investors are getting banged up. Harvard lost about $350 million last month after an investment in the hedge fund Sowood Capitol Management went south.

In Washington, I’m Steve Henn for Marketplace.

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