As I have previously noted (here), securities backed by subprime and other residential mortgages are not just held by financial companies. A wide variety of companies invested in these securities in order to try to improve their return on cash and short-term investments. As the credit markets have deteriorated, many of these investments have declined in value, and the companies holding these investments have been forced to take write-downs or charges. The most dramatic write-downs have come from companies in the financial sector. But now companies outside the financial sector are announcing downward accounting adjustments, and some of these accounting adjustments are occurring in some unexpected places.
One More Thing to Worry About: Credit Default Swaps: As the recent turbulence involving the bond insurers has demonstrated, another type of complex instrument with which we are all going to have to get familiar is the credit default swap. According to the Seeking Alpha blog (here), the notional value of the CDS market is in excess of $45 trillion, of which the major financial institutions hold about 40% — the implication being that the other 60% is held by somebody other than the major financial institutions.