Let’s look back to the summer of 2007, as the subprime crisis exploded. We are still paying the price today, although the US is now focused on healthcare reform and other matters.
On February 7, HSBC Holdings, formerly called Hong Kong Shanghai Bank Corp, warned of massive forthcoming losses, arising mainly out of problems at its US subsidiary, Household Bank, a leader in subprime lending. Another big subprime lender, New Century Financial, did the same. Along with the waves of real-estate foreclosure notices now piling up in the clerk of court offices in the former hot markets, the markets slowly started to realize what was, for the lenders anyway, a very inconvenient truth: a lot of these mortgages were never going to be paid back. A lot of major financial institutions that had invested in subprime mortgage debt, not just HSBC and New Century, were looking at very serious balance-sheet problems.
Here is a long and detailed article from which the quote was taken.