The subprime mortgage fears that have plagued the world's capital markets for weeks now are not just a global economic problem: they are a dangerous domestic political issue as well. Over 2m Americans-many of them poor and black-face sharply higher mortgage payments over the next year or so, as the low introductory rates on their loans reset. A lot of these people could lose their homes. If the economy slows and overall house prices fall by the 15% or more that some Wall Street seers are now predicting, the problem could spread far beyond the weakest borrowers. Default rates have already risen sharply. No one knows how bad things will get. The Bush administration predicts that around three-quarters of subprime borrowers will be able to work out their problems. But it is clear that there is worse to come-and next year's presidential and congressional elections are looming.
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