UH OH...THE DISEASE IS SPREADING...

The problems with the sub-prime/housing bubble may spread to the supposedly safe money market funds. From Bloomberg:

Tracing the Chain

So what's the most worrying link in the causal chain that snakes from mortgage defaulters in California via New York mortgage-bond desks, through the CDO market and into the SIVs? It could well be U.S. money-market funds, which juiced their returns by finding ways to put money to work aboard the subprime mortgage market bandwagon, including lending money to SIVs.

More than $2.9 trillion is invested in U.S. money-market mutual funds, up almost 50 percent in the past two years, according to the Investment Company Institute, the mutual-fund industry's trade group. Analysis by my Bloomberg colleague David Evans suggests the subprime contagion may have affected as much as $300 billion of those funds.