The credit crisis and recessionary pressures brought on by the collapse of US housing prices continued unabated for US banks into the second quarter of 2008. In Canada, only those banks with direct exposure to the US housing market came under stress. Latin American banks, further removed from these markets, are beginning to deal with slower growth and increasing inflationary pressures in their own markets.

US: credit crisis enters new phase

The US banks’ 2008 first half was defined by significant residential mortgage-related events as two of the US’s largest mortgage banks were taken over in July: Countrywide Funding Corporation was absorbed into Bank of America and IndyMac was taken over by the Federal Deposit Insurance Corporation (FDIC). Both were victims of a highly concentrated business in mortgages and heavy dependence on wholesale funding...