Mortgage loss threatens US banks

The US housing downturn may have major financial repercussions, experts have warned, as Wall Street faces up to the crisis in the sub-prime lending market.

Bear Stearns, a leading US finance firm, is trying to prevent the collapse of two hedge funds with major exposure to the high-risk mortgage sector.

Should it sell off investments cheaply, it is feared similar funds will follow suit, causing a crisis in confidence.