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There are some subtle signs of credit deterioration, however.
Even if banks expected credit deterioration, they could not reserve against unincurred losses.
While traditional lenders began tightening credit six months ago, he said, the situation became urgent "about 90 days ago, as credit deterioration and availability hit catastrophic levels".
"This is a political shock which has clearly challenged consumer and corporate confidence [but it has] not yet resulted in any credit deterioration".
With house prices still falling, credit deterioration spreading and derivatives markets deeply unsettled, is anyone willing to bet that Bear Stearns is the last of the $2 sales?
Miller, however, added that given the rapid credit deterioration and weak secondary market demand, markdowns on Countrywide's loans could easily exceed Bank of America's estimates when the company performed due diligence and the cushion was built into the deal.
Similar(40)
Indeed, the paper did warn that "the subprime segment of the U.S. housing market is showing signs of credit quality deterioration" and that the problem could "deepen and spread to other markets".
"The credit quality deterioration at Sears has been similar to that experienced by other issuers during the soft economy of the past two years," said Richard B. Shane Jr., an analyst at Jefferies & Companies, in a research report published yesterday.
"The retail credit quality deterioration is accelerating but it's still not falling off a cliff".
"We are more than compensated for the risk of credit-quality deterioration with extra yield," Mr. Kennedy said.
The report estimated that credit losses from deterioration in the mortgage and lending markets would not peak until early 2009, and that American banks, having already raised about $120 billion in capital, would need to raise an additional $65 billion.
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