Will the subprime fallout snag private equity?

Ben Bernanke told us in May that the impact of subprime mortgages collapsing would be contained. But The Financial Times begs to differ. FT reports that leading bankers are trying to calm the global markets even as they admit that the shockwaves from the U.S. subprime collapse could put private equity deals on hold for the next few months.

Is Ben Bernanke wrong? How could a former Princeton economist not understand that problems in one category of loans might make banks nervous about other loan categories? Or is it simply that Bernanke took his job as economic cheerleader in chief a little too seriously?

One banker thinks it could be three months before subprime's damage takes its foot off the brakes of private equity. Bob Diamond, Barclays president, predicted the consequences of the subprime collapse could take more than a year to be resolved. However, he said the leveraged loan market should recover more quickly: "We would expect at some point over the next two to three months to see that market at more normal volume levels."

Maybe Diamond is right and Bernanke is righter. But is it possible that their predictions are just wishful thinking? I don't know. What do you think?

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.