John W. Schoen Senior producer • Profile • E-mail

It's not just subprime loans. These days, just about anyone holding a piece of the roughly $27 trillion in credit securities — everything from municipal bonds to funding for student loans — is asking: Just how much are these things worth?   

The question is more than academic. Though most Americans pay much closer attention to the stocks in their retirement accounts, the credit markets provide the critical raw material — capital — for companies issuing those stocks. And lately, the supply of credit has been in disarray.

“Because of the depth and the length and the severity of housing recession, a lot of the intermediaries in this whole credit system — which include banks and bond insurers — have had severely deleted capital,” said Brian Bethune, U.S. economist at Global Insight, an economic forecasting company.

The biggest single cause of that depletion of capital is the ongoing drop in the value of American homes. Mortgages on those homes represent roughly $6.4 trillion, or about a quarter of the total debt sold by banks, corporations, government and other credit market players, according to Bethune.

And as home prices continue to fall, the capital base of the mortgage debt held by investors will continue to erode. On Thursday, the Federal Reserve reported that — for the first time since 1945 — the total amount of equity Americans own in their homes fell below the total amount they owed on those homes.

When the credit markets run low on capital, the Federal Reserve steps in to provide more — usually in one of two ways. Aggressive cuts on short-term interest rates — which some Fed watchers say came later than they should have — have cut the cost of money to try to make credit more available and help battered lenders repair the damage to their balance sheets.

The Fed has also offered to buy back $100 billion of debt securities banks may want to unload. On Friday, the Fed announced that it was expanding the list of debt securities it would buy.

But despite those moves, some debt securities — even relatively safe ones — are still going begging. Last month, for example, investors shunned debt auctions from the Port Authority of New York and New Jersey and from a Michigan student loan program.

There’s no reason to believe the Port Authority will have any problems collecting tolls, nor are Michigan students likely to default on loans any more than they have in the past. What’s different is that some investors are so nervous about debt in all forms that they’re hoarding cash and waiting for signs that the storm has passed.

Worries about municipal bond insurers, for example, have lead to fears that even the highest-rated bonds could become a risky bet if those bond insurers don’t have the cash to pay investors in the event a bond issuer defaults.

On Friday, bond insurer Ambac Financial said it had raised another $1.5 billion, mostly by selling stock, in order to keep its own credit rating intact. Ambac CEO Michael Callen told CNBC that he thinks the worst-case scenarios are overblown.

“But there is today … a focus on these extreme situations,” he said. “And the world generally doesn't get there.”

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