Meanwhile, from 2002 to 2007, under George W.'s watch, the biggest U.S. banks would fashion nearly 80% of the approximately $14 trillion worth of global mortgage-backed securities (MBS), asset-backed securities, collateralized debt obligations, and other kinds of packaged assets created in those years.
Banking tycoons didn't do as well, recently hit by the global downturn in mortgages.
"Although this episode appears to have been triggered largely by heightened concerns about subprime mortgages, global financial losses have far exceeded even the most pessimistic projections of credit losses on those loans," Bernanke said.
The Bank of England cuts interest rates by a quarter point to 5% to counter the effects of the global credit crunch on mortgage markets, which are seeing rising mortgage rates in the UK.
Darrell Duffie, a professor of finance at Stanford, who said that "sovereign debt concerns are much more global than the subprime mortgage risk of 2008".
"So far it's not as bad as 2008, but it could get much worse because the sovereign debt concerns are much more global than the subprime mortgage risk of 2008," said Darrell Duffie, a professor of finance at Stanford and an expert on the banking system.
Over the last three weeks, since Lehman Brothers Holdings filed for Chapter 11 bankruptcy in the U.S. and several Wall Street banks have gone to the wall due to bad investments in the U.S. subprime mortgage market, global equities have been extremely volatile.
This was true of the NASA Challenger and Columbia disasters (schedule and budget versus safety), the BP Gulf Oil spill (profit versus safety) and most of the behavior that led to the global financial crisis including, mortgage fraud and Libor manipulations (profit versus trust and transparency).
Those prices are likely to stabilise next year and with them the levels of home equity the ultimate collateral for global holdings of American mortgage-backed securities, some toxic.
Some analysts blame that failure for the mortgage crisis and global economic strains.
It was low capital requirements, weak limits on leverage, over-the-counter traded derivatives, soft rules on mortgage lending and global financial imbalances.
