Just when the financial markets took some solace from news that Countrywide, the largest U.S. mortgage lender, had taken steps to shore up its finances as it struggles with a liquidity crunch with an infusion of $2 billion from Bank of America to help stabilize the company, Bank of China disclosed its $10 billion position in U.S. subprime market which is estimated to eat 30% of the Bank's 2007 profitability. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

What makes this even more interesting is a statement made by Wang Zhaowen, a spokesman for Beijing-based Bank of China, on August 15, 2007. He stated that subprime losses for the six months would be "insignificant'', without giving details. 

In addition to concerns regarding the Chinese disclosing policy, this highlights the complexity of predicting how wide-spread this kind of crisis is. Good example is <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Finland, early 90s, when the total bill was 10-fold compared to what was estimated. The chain reaction is just in the beginning.

Stock price development: Countrywide

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Stock price development: Bank of China

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