Root Out Bad Debt or More Pain Will Follow

The devastating credit squeeze that has been gumming up the interbank and commercial paper loan markets for months shows few signs of letting up. The underlying problem remains firmly in the market for subprime mortgages.

During the savings and loan crisis of the late 1980s, dud mortgages were held by the banks that issued them. This made identification of the infected institutions simple and the solution obvious: shut them and sell their assets at a steep discount. The bill to the US taxpayer was considerable, about $125bn, but the damage to the wider economy was minimal because the crisis was well contained.

The subprime virus is far more difficult to quarantine. Securitisation of mortgages has spread the financial risks around the economy in such a way that banks are no longer likely to go bust from holding the bad loans they originated. read more

Home defaults on rise in Isles

Foreclosures are on the rise across the nation and state, and are beginning to climb in Glynn County.

In January alone, foreclosures across the country jumped 27 percent, according to RealtyTrac, a private company that tracks foreclosures.

The number of properties in some stage of foreclosure in Georgia during the same month was 7,342, putting the Peach State among the top five in the U.S.

The others were California, Florida, Texas and Ohio.

The rise in foreclosures mirrors a similar increase in the number of personal bankruptcy filings in the state.

Georgia had the second-highest rate of personal bankruptcies in the nation in 2007, according to data compiled by the National Bankruptcy Research Center.

Georgia bankruptcy courts processed 48,227 personal bankruptcy filings last year, an increase of 24 percent over 2006, according to the research center. read more