http://news.yahoo.com/s/ft/20070425/bs_ft/fto042520071733283602
The bank of England warns that "(risky) bank loans (including loans for the private equity industry) are repackaged and resold to new investors, such as pension and hedge funds." In other words, the banks are now using investors' money for new kinds of loans that are just as risky as sub-prime liar mortgages.
At the end of the day it looks like a lot of investrors who would never make these risky loans are going to end up owning them, and the banks that made them will have collected large fees and have no exposure.
The US government is apparently unconcerned since the FDIC insured money that the banks use is not being risked.
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