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Yet the contagion continued.
WASHINGTON - The Federal Reserve was scrambling to prevent a "contagion" from infecting the nation's financial system when it took unprecedented actions to back a Bear Stearns rescue package and provide emergency loans to big Wall Street firms.
The market is gripped by "subprime contagion," said Peter Boockvar, equity strategist at Miller Tabak.
"There's a monster amount of fear out there. This is global contagion. It's no longer just the United States," said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.
Fallout from the sudden demise this week of two of the world's biggest investment banks, combined with the struggle by American International Group Inc. to remain solvent, has made an already bad economy worse in the United States and risks triggering an international contagion, said Mr. Snow, who retired as President George W. Bush's secretary of the treasury in 2006.
A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets.
Contagion refers to the idea that financial crises may spread from one institution to another, as when a bank run spreads from a few banks to many others, or from one country to another, as when currency crises, sovereign defaults, or stock market crashes spread across countries. When the failure of one particular financial institution threatens the stability of many other institutions, this is called systemic risk.