The contraction of the ABCP market suggests an explanation for why bank balance sheets have not (so far) contracted as sharply as they did in 1998. The beginnings of the credit problems of 2007 were fi rst manifested by falling prices of securities that are associated with the subprime sector. For instance, the ABX indices started to fall in June of 2007. The ABX indices track the credit default swaps (CDS) associated with various rated tranches of collateralized debt obligations (CDOs) written on subprime mortgages, and are compiled by the London fi rm Markit. 5 The falls in the prices.
