Two more subprime surprises could tank Monday's market

Bloomberg News reports two more German banks are exposed to subprime toxic waste. I guess this means we can expect this kind of dribbling out of bad news every day -- but I don't know when it will stop.

WestLB, Germany's third-largest state bank, said on August 11 it has $1.7 billion in subprime-linked investments. The announcement followed a report on August 9th that the bank is facing a "liquidity crisis," which it denied. I wonder if the market will believe this claim. Additionally, Deutsche Postbank AG, Germany's biggest consumer bank by clients, said yesterday it has about $1.1 billion of investments linked to U.S. residential mortgages, including subprime loans.

I have no idea how the market will react to this news. But it would not surprise me if the European Central Bank (ECB) responded by pumping more liquidity into the European banking system. The apparent lack of a central repository of information should continue to chip away at investor confidence.

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.