If your wondering why we should care about the fate of a US bank.
Try applying the following to the UK housing market;
Asset prices were propped up only by the fact that people were able to borrow unreasonable amounts of money to bid for them, and were able to borrow such amounts only because they were seen to be acquiring valuable assets – ie the whole thing was a grand illusion, sustained by a collective loss of common sense, helped with massive dollops of self-interested propaganda by the financial, construction, real estate and media industries. Now it’s the same thing, in reverse. People cannot borrow, thus cannot bid for assets, whose prices fall down as they need to be sold – and those deep in debt need to sell (ar dump the assets to banks that then need to sell). As prices go down, all loans based on collateral dry out – and more generally banks are getting stingy as they struggle with all those doubtful assets on their hands, so lending dries out.
Here comes the flood.
via oil drum