Feb. 19

　　The credit markets are seizing up and the uncertainty recently drove up short-term interest rates for municipalities and some rock-solid institutions such as New York's Metropolitan Museum of Art to 20%. And now even so-called prime borrowers, the ones who were properly vetted, are being sucked into defaults on their mortgages. So what's the worst that could happen.

　　A number of economists and banking industry experts believe the subprime crisis could metamorphose into the biggest debacle to hit the sector since the savings and loan catastrophe of the 1980s, which caused some $500 billion in losses to the banking industry. And that means the future of a couple of name-brand financial institutions could be in jeopardy.

　　Much will depend on how far home prices tumble over the next few quarters, how high unemployment climbs, how many homeowners are pushed into foreclosure from rate resets, and, most importantly, how far the crisis spills into the conventional mortgage market and other parts of the credit sector.

　　Home prices fell about 6% in 2007 and are expected to tumble another 15% in 2008, 10% in 2009 and 5% in 2010, Unemployment, which climbed to its highest level in two years in December at 5%, will hit 5.8% by year end and 6% in 2009. As this happens, the crunch will likely expand into prime mortgages, home equity loans and credit cards, making it the worst consumer recession since 1980.