The triple-A gradings alloted to exotic mortgage-backed products like collateralized debt obligations turned out to be overly optimistic when significant numbers of borrowers defaulted on home loans, setting off a global credit crisis that has yet to be resolved.
The South Africa loan has set off the latest skirmish in a long-running conflict between multilateral lending institutions and environmental groups.
Businesspeople fear that bankers, by calling in bad loans, will set off a vicious circle of more bankruptcies, more unemployment and less consumer demand.
He said that led the developers to default on construction loans, which in turn set off a foreclosure process.
To the extent that the project is financed by government loans, it could also set off a major trans-Atlantic trade spat.
And according to former bank regulator William Black, the sheer size and riskiness of the JPMorgan trade -- a $100 billion bet tied to complex derivatives linked to pools of corporate loans -- should have set off alarm bells at regulators watching general bank safety and soundness, even without the Volcker Rule.
Pointing to statements by former bank officials that senior executives had overruled decisions to classify bad loans as nonperforming, and thus set off losses, United States District Court Judge Inge Prytz Johnson wrote that the allegations "clearly show that defendants had access to and were aware of a financial situation that was not as strong as they were suggesting to the public".
The Capital One Financial Corporation, a leading issuer of Visa and MasterCard credit cards, said regulators required it to increase reserves for loan losses, setting off a sharp decline in its stock and that of its rivals.
But Mr. McCain, a Republican from Arizona, indicated that the government has a role in helping the truly needy, and he likened the current crisis to the savings-and-loan meltdown in the 1980s, which set off an extensive government bailout to soften its effect on the economy.
The mortgage crisis, which was set off by defaulting subprime loans last summer, has forced lenders to tighten their standards across the board in both Manhattan and the boroughs.
