It looks like the mortgage crisis isn’t being contained to the U.S.

There was news today that the United Kingdom’s central bank, the Bank of England, extended an emergency line of credit to Northern Rock, one of the UK’s largest mortgage lenders, reported the Washington Post. This caused some customers to line up outside the bank and withdraw their money – a run on the bank if you will.

In Canada, Xceed Mortgage Corp. will no longer pay shareholders a dividend, citing “extreme credit market turbulence,” reported Toronto’s Globe and Mail newspaper. The company attributes the credit market problems to commercial paper fallout. Commercial paper is a way to raise money in the short term, by selling receivables in exchange for cash. A receivable is an asset that you expect to get in the future.

Canada’s subprime market is 5 percent of its mortgages compared with 20 percent in the U.S., so the risk of a collapse of their housing market is somewhat smaller.

Pretty soon other countries won’t be able to bail out the American economy. The question is, Whose job is it?

Some say the Federal Reserve should lower interest rates. Some want mortgage companies to cut troubled borrowers a deal. Some want Congress to pass legislation. Yet, 56 percent of Americans think the government should stay out of it.

Meanwhile, the stock market is betting that the Federal Reserve will lower interest rates at its meeting next week.

September 14, 2007