JP Morgan, America’s third biggest bank, has been hit again by the subprime crisis.

This time the hit is more than $4.6 billion (£2.6bn), taking its credit crunch losses to around $15 billion since August — an unparalleled rate of attrition.

Meanwhile, the bank’s profits tumbled by 51pc to $2.5 billion in Q1, eased slightly by a winning bet on the flotation of card giant, Visa.

Since the Fed is backing JP’s rescue of Bear with $30 billion, this will send a shudder down the spine of Ben Bernanke, the Federal Reserve’s Chairman.

Signs that the crunch is biting even deeper are coming across the board. House building in the U.S. is now at its lowest level for 17 years. JP Morgan suffered a 20pc reversal in its credit card division, while its retail banking arm slipped by over a billion dollars.

JP’s chief, Jamie Dimon, said, “The Economic environment will continue to be weak and the capital markets will remain under stress.”

With Britain beginning to feel the strain, along with some European economies, it’s now clear that the worst is still to come.

A version of this article has appeared in Moneyizor — Money, The Big Picture

For those who don’t know, Fannie Mae and Freddie Mac are chartered finanicial institutions that guarantee 60 percent of the U.S. home loan market. Both are in serious trouble because of the meltdown in the housing market.

The U.S. Federal Reserve Bank

They dominate the top-tier of lenders that control $6 trillion of mortgage lending. A collapse would trigger an unprecedented crisis across the world’s largest economy and swift knock-on effects around the globe.

The Fed is pulling every lever available to it to neutralize the toxic effects of the subprime disaster. It’s predicted to lower rates by another 75 basis points within days, and is now offering Treasury bonds in exchange for mortgage debt. By soaking up some of the poison, the central bank hopes to take the sting out of the troubled banking crisis.

Like the British mortgage bank, Northern Rock, Freddie and Fannie may have to be nationalized to shore up the economy.

Bernard Connolly, Global Strategist at Banque AIG, believes Fed action won’t solve the problem of eroded of bank capital. “There is the risk of a very damaging credit contraction. We face the most serious global crisis since the Great Depression. But this time at least the North American central banks are doing their best to stop it spreading to the real economy. We should be thankful that we have people in charge who appreciate the gravity of the situation.”

A new book by Nobel prizewinning economist Joseph Stiglitz tracks the effect that the war in Iraq has had on the American economy. The Three Trillion Dollar War — The True Cost Of The Iraq Conflict outlines the immense downside across the globe of this policy.

In terms of the current credit crunch, which arose out the sub-prime mortgage fiasco, many had blamed Alan Greenspan, then Chairman of the U.S. Federal Reserve Bank, for keeping rates too low for too long. Combined with steeply rising house prices this gave the banks a one-way bet for lending to the trailer-park poor.

However, it’s clear from Stiglitz’s book that the low rate regime was engineered to mask the terrifying cost to the American economy of the wars in the Middle East.

We can now see the extent of the disaster to American interests the war is continuing to cause. The conflicts have led to a strengthening of Gulf, Chinese and other sovereign wealth funds which have bought up large chunks of prime U.S. assets, including blue-chip bank stock, while, in some cases, simultaneously enjoying a bonanza from higher and higher oil prices.

In ten years these bank stocks should prove exceptionally rich investments as they recover from current adverse credit conditions. The war has given them a one-way bet.

Joseph Stiglitz works out the numbers and they make depressing reading.

The American economy is now in recession. A slew of new data clearly reveals both a marked slowdown in activity, combined with a rise in inflation — something not seen since the stubborn “stagflation” period of the 1970s.

Despite all this, some economists expect a robust return to growth later in the year off the back of aggressive rate cuts by the Fed and a financial package from the President that will see checks delivered to taxpayers, and others on low incomes, by June.

We shall see.

The United States’ Federal Reserve has intervened dramatically to cut base rates by a huge 75 basis points or 0.75 percent, indicating that it regards recession as more likely than not. This is the single biggest cut by the Fed in 20 years.

The markets are less than impressed, however, regarding it as a panic measure. The White House has also weighed in with the President saying he is considering an even bigger fiscal stimulus than the recently announced $150billion.

America means business.

Syntagma has an in-depth analysis of the upcoming recession. Here’s a taster :

As we’ve been saying here in Syntagma for some months, a long, deep worldwide recession now looks more likely than not. Opinions are hardening among key players, principally in America and Britain.

Yesterday, the Wall Street Journal proclaimed : “U.S. warning signs point toward deep recession”.

Now even the insurance companies, or Monolines, that underwrite possible defaults, are also in trouble, with two of the biggest in the U.S. said to be close to Chapter 11 status (a form of bankruptcy protection against creditors).