Market Bodes Badly for U.S. Banks

Scary times are here again: U.S. banks are once again living in fear, with Monday’s beating in the market—their shares plunged 11 percent—just the latest bad news. While few people expect a repeat of 2008’s Lehman debacle, banks are still sitting on huge portfolios of home loans, and a potential recession could lead to fresh losses on these assets. Bank of America, for example, controls one-fifth of the country’s home loan market, valued at $1 trillion. Its share value fell 20 percent Monday after the U.S. credit downgrade and AIG filed a $10 billion lawsuit against it alleging a “massive fraud.”