M&T Bank and Fulton Financial get to be the harbingers of the spread of the subprime disease in the Alt-A marketplace. Alt-A loans are made to borrowers with good credit scores but do not conform to FHA rules for various reasons. No or low documentation (”liar’s loans”), excessive LTV (100% and more), too big (jumbo) and so forth. The disease is the same - early defaults indicating that the loan was probably fraudulent in some respect, and a secondary market that has dried up.

Unfortunately people can’t see the forest for the trees - they see mortgage defaults and think that there’s a housing problem. It’s not a housing problem, it is a credit problem. There’s just too much of it. Defaults are rising on all kinds of consumer loans - cars, boats, and yes, even Harley-Davidson motorcycles - 20% of their “hogs” loans are subprime and the 30-day delinquency rate on such loans has increased from a 3.6% between Q1 of 2005 and Q2 of 2006 to 5.18% in Q4 of 2006, an almost doubling of delinquency rates in two quarters. Consumers are choking with debt.

This excellent video - Money As Debt - explains why the credit bubble has to grow or die. While it is a bit oversimplified and a touch polemical in places, it has all the essential facts right.

The Mortgage Implode-O-Meter blog now counts 45 failed lenders. I don’t know if ayone other than my wife reads this blog, but if you do - be warned, this credit implosion will have serious consequences on the prices of assets of all kinds. Protect yourself. Read Prechter’s book, or one of the others on the same subject.