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However, Wall Street remains preoccupied by the problems in the American mortgage market, which is the source of most of the trouble. And the bad news is that things look likely to get worse before they get better. The explanation lies in the structure of the market.

In round figures there are mortgages on about 50 million domestic properties in the US. Of them about 15%, or seven million, are categorised as subprime. The subprime percentage has escalated dramatically in the last three years. In the previous decade the proportion was 9%: in the last three years it was just over 20%.

Of the seven million, about one million are in trouble, in other words the borrowers are at least 60 days behind with their payments. The proportion of non-payers is double the normal rate. And there are good reasons to think the number will grow. Many of these mortgages have been sold with 'teaser' rates for the first two years – what we call low-start mortgages. After the low rate period the interest payments are reset, typically in relation to Libor. It is at that point that the borrowers realise they are in over their heads, and stop paying.

Resets have been happening already, and will continue. Indeed the peak month for resets is March 2008. Whatever the Fed does with interest rates will not much affect the issue, as it is inconceivable that Libor could descend below the 'teaser' rates. So the news from over here will remain bad for a while. There's no logical reason why that should create more problems in London, but since when did logic reign in financial markets?