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Recently, investors in two Bear Stearns hedge funds with substantial subprime mortgage holdings were informed that their investment had essentially evaporated, along with the credit of the less than creditworthy borrowers who took those mortgages. On July 18, Federal Reserve Chairman Ben Bernanke predicted that losses among subprime investors could dramatically worsen, reaching as high as $100 billion. Well, that’s the capital markets for you. But should U.S. companies be concerned about a similar meltdown in the markets backing a substantial amount of corporate lending? You can bet your collateralized loan obligations (CLOs) they should be.

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