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| More banking woes hit US shares | More banking woes hit US shares |
| (10 minutes later) | |
| The main US share indexes fell sharply on Friday, hit by ongoing concerns about the impact of the US mortgage debt crisis on leading banks. | The main US share indexes fell sharply on Friday, hit by ongoing concerns about the impact of the US mortgage debt crisis on leading banks. |
| Fourth largest lender Wachovia sparked the latest share falls after it said its losses on bad mortgage debt would total $1.1bn (£525m) for October alone. | Fourth largest lender Wachovia sparked the latest share falls after it said its losses on bad mortgage debt would total $1.1bn (£525m) for October alone. |
| Its admission, just the latest from a major US bank, saw the Dow Jones index end down 235 points or 1.8% to 13,031. | Its admission, just the latest from a major US bank, saw the Dow Jones index end down 235 points or 1.8% to 13,031. |
| The Nasdaq index also fell heavily, down 68 points or 2.6% to 13,031. | The Nasdaq index also fell heavily, down 68 points or 2.6% to 13,031. |
| Dominated by technology companies, sentiment on the Nasdaq was further hit by weak results from wireless telecoms firm Qualcomm. | Dominated by technology companies, sentiment on the Nasdaq was further hit by weak results from wireless telecoms firm Qualcomm. |
| Sub-prime spark | Sub-prime spark |
| The bad debt crisis centres on sub-prime home loans. | |
| The problem right now... is the belief that the market is going to be stuck with these write-down announcements from the banking sector for some time Patrick O'Hare of Briefing.com Barclays denies bad debt | The problem right now... is the belief that the market is going to be stuck with these write-down announcements from the banking sector for some time Patrick O'Hare of Briefing.com Barclays denies bad debt |
| As US mortgage rates have risen sharply over the past year, the sub-prime sector, which specialises in loans to people with poor credit histories or those on low incomes, has seen record levels of loan defaults. | As US mortgage rates have risen sharply over the past year, the sub-prime sector, which specialises in loans to people with poor credit histories or those on low incomes, has seen record levels of loan defaults. |
| The losses US banks have had to swallow are twofold. | The losses US banks have had to swallow are twofold. |
| Firstly, their direct exposure to bad sub-prime debt, and secondly, the knock-on fall in the value of all mortgage debt. | Firstly, their direct exposure to bad sub-prime debt, and secondly, the knock-on fall in the value of all mortgage debt. |
| This situation has been exacerbated by the fact the banks have, in recent years, increasingly packaged their sub-prime debt into wider debt packages called collateralised debt obligations (CDOs), which are then sold on to investors. | This situation has been exacerbated by the fact the banks have, in recent years, increasingly packaged their sub-prime debt into wider debt packages called collateralised debt obligations (CDOs), which are then sold on to investors. |
| Yet with investor confidence at rock bottom, banks have struggled to find buyers for these CDOs, which have thus fallen in value. | Yet with investor confidence at rock bottom, banks have struggled to find buyers for these CDOs, which have thus fallen in value. |
| This has sparked the wider credit crisis as banks and other lenders have been less willing to lend to each other. | This has sparked the wider credit crisis as banks and other lenders have been less willing to lend to each other. |
| "The problem right now isn't so much the size of the write-down at Wachovia, as it is the belief that the market is going to be stuck with these write-down announcements from the sector for some time," said analyst Patrick O'Hare of Briefing.com. | "The problem right now isn't so much the size of the write-down at Wachovia, as it is the belief that the market is going to be stuck with these write-down announcements from the sector for some time," said analyst Patrick O'Hare of Briefing.com. |
| The Standard & Poor's 500 index ended down 23 points, or 1.5% to 1,452.12. | The Standard & Poor's 500 index ended down 23 points, or 1.5% to 1,452.12. |