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| Version 2 | Version 3 |
|---|---|
| Bank of America in sub-prime hit | Bank of America in sub-prime hit |
| (about 2 hours later) | |
| Bank of America has revealed that it will have to write off $3bn (£1.4bn) of bad debts and warned that its losses could grow. | Bank of America has revealed that it will have to write off $3bn (£1.4bn) of bad debts and warned that its losses could grow. |
| It is to spend another $600m supporting some of its funds because the value of their investments is uncertain. | It is to spend another $600m supporting some of its funds because the value of their investments is uncertain. |
| But Bank of America said that it considered the potential losses to be "manageable". | But Bank of America said that it considered the potential losses to be "manageable". |
| It is the latest bank to reveal losses as a result of investments linked to the US sub-prime home loans market. | It is the latest bank to reveal losses as a result of investments linked to the US sub-prime home loans market. |
| Citigroup has already said it will write down as much as $11bn and Morgan Stanley expects to write off up to $6bn before the end of the year. | Citigroup has already said it will write down as much as $11bn and Morgan Stanley expects to write off up to $6bn before the end of the year. |
| But there was some better news from Goldman Sachs on Tuesday. | |
| Its chief executive Lloyd Blankfein told a conference that his bank would not have to take significant charges to cover sub-prime losses. | |
| Impossible to value | Impossible to value |
| Sub-prime mortgages are offered to people with inferior credit records or unpredictable incomes. | Sub-prime mortgages are offered to people with inferior credit records or unpredictable incomes. |
| A vast number of these loans were dished out over the past few years when borrowing costs were cheaper and more affordable. | A vast number of these loans were dished out over the past few years when borrowing costs were cheaper and more affordable. |
| But a steep rise in US interest rates over the past two years has resulted in many borrowers unable to pay these mortgage repayments, leading to record defaults and foreclosures. | But a steep rise in US interest rates over the past two years has resulted in many borrowers unable to pay these mortgage repayments, leading to record defaults and foreclosures. |
| It then turned out that the debt from sub-prime loans had been packaged together and sold to other banks around the world. | It then turned out that the debt from sub-prime loans had been packaged together and sold to other banks around the world. |
| Because the market for such debt has largely disappeared, banks are left holding debt to which it is almost impossible to attach a value. | Because the market for such debt has largely disappeared, banks are left holding debt to which it is almost impossible to attach a value. |