Underlining the Fed’s desperate attempts to calm markets, for the first time it said that it would accept mortgage-backed assets as collateral from the banks for fresh loans.
As the fear spread, billions of dollars of value were wiped off the bonds of US companies as the perceived risk of owning the bonds – measured by the widening of credit spreads – rose to its highest level.
Friedman, Billings, Ramsey, the US analyst firm, said that the US financial industry would need $1 trillion of permanent capital to maintain current pricing of mortgage assets. However, he added that the industry would not be able to obtain that amount.
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The Subprime Mortgage Crisis Before, During, and After
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