There has been a feeling in some quarters that the worst of the credit crunch, brought about by the greed, arrogance and stupidity of the banks was over.
Unfortunately this is not the case. To add to the litany of the banks' failings we must add another, fraud.
Standard & Poor report that the US mortgage crisis will become considerably worse, because the level of fraudulent lending to unsuitable borrowers was much higher than previously estimated.
David Wyss, Standard & Poor's chief economist, is quoted in The Times speaking at a conference in Bombay:
"The panic has subsided, but the housing market has not hit bottom yet. Housing prices won't hit bottom until next summer and the losses won't peak for another two years, until 2009. We are not halfway through this crisis yet.
We underestimated the extent to which fraud was occurring in the industry. It looks [as if], based on some surveys that had been done, the extent of frauds increased sharply in 2006."
The frauds increased as lenders looked for new customers, having sold all the mortgages that they could to legitimate customers.
In effect the sub prime mortgage industry was nothing more than a pyramid (Ponzi) scam. In order for it to work the banks had to keep selling more mortgages in order to boost their commissions and to maintain their cash flow as other sub prime mortgages, sold earlier, began to default.
These toxic debts were then bundled with good debt and sold around the world to other banks and financial institutions, who deluded themselves that they knew what they were doing.
Hence, as the situation in the US worsens, the effect will be felt here as the banks that were stupid enough to buy these useless products take the hit.
Regrettably the Bank of England has chosen to ignore the economic Tsunami that is heading our way, and has sat on its hands at yesterday's MPC meeting and kept interest rates unchanged.
By the time the Bank of England wakes up to this, it will be too late.