The result has been rising defaults, particularly in the subprime mortgage markets, with losses to both investors and financial institutions. The ultimate losses from the recent residential mortgage-market meltdown have been estimated by Wall Street analysts at about $ billion – less than 3 percent of the outstanding $ trillion in U.S. equities.
2 Why did a relatively small amount of losses on subprime mortgage loans lead to such broad-based financial disruption? After all, a 3 percent decline in stock market prices sometimes happens on a daily basis with hardly a ripple in the U.S. economy.