European Central Bank President Jean-Claude Trichet has pledged to watch developments closely, but said it was too soon to gauge the damage. - Reuters

More than the US$100 billion that matured in mid-August when the credit crunch first reached a peak.

SIV TROUBLE

Uncertainty has bee by the fact that troubled structured investment vehicles (SIVs) do not necessarily show up on balance sheets. Moody's Investors Service said on Wednesday it was taking ratings action on US$14 billion of SIV debt.

These vehicles have raised cheap cash by issuing short-term commercial paper and buying higher-yielding securities, often U.S. mortgages, and pocketing the difference.

Seven SIVs run by Citibank said the credit quality of their portfolios remained "very strong" but the asset-backed commercial paper market was seeing "unprecedented volatility".

Interest rates have also been left on hold by Canada and Australia this week.

But investors are looking to the Federal Reserve's meeting on September 18 as the crucial one. Nothing but a rate cut will calm market tumult, which is now being whipped up by the threat of a U.S. recession.

The rate of U.S. home loans entering the foreclosure process rose to a record high in the second quarter of 2007, driven largely by failing subprime mortgages, an industry trade group said yesterday.

William Rhodes, senior vice chairman of Citigroup Inc., said the U.S. economy would inevitably take a hit from the subprime crisis. How hard remained to be seen, he added.

"There will be an impact on the real economy and that depends on the impact on the consumer," Rhodes told ameeting of the World Economic Forum in China. "If it affects in any way strongly the consumer, then you've got a problem."

- Reuters

TAKEN FROM THE FINANCIAL GLEANER, FRIDAY, SEPTEMBER 8, 2007