Don't be surprised if your home, or at least its mortgage, is owned by the Chinese. How so? Sifting through the flood of stories that describe the ripple effect of the subprime mess on local and state governments, I discovered that The Bank of China, that nation's second largest commercial bank, holds about $9.7 billion in bonds backed by American mortgages, both highly rated as well as the feared subprime. Just knowing that those U.S. assets included subprime mortgages is enough to cause the bank to prepare for the worst because our low-rated home loans have become a pox on the world economy.

Although poxes rarely prove fatal, the very presence of subprime mortgages is causing panic. For example, despite Florida's state-run investment pool's inclusion of a relatively small amount of commercial paper backed by subprime-related debt, enough local governments there withdrew their money in November for the state to temporarily suspend withdrawals. Before the run, Florida's investments in the fund totaled $32 billion. After the run, the pool has about $14 billion in it.

The communities still in the fund can withdraw relatively small amounts of money, but the longer their withdrawals are limited, the worse the situation may become. For example, Port St. Lucie, Fla.'s finance director recently told The New York Times that the city would run out of money by the summer if the fund's restrictions aren't changed.

The subprime pox generally is causing uneasiness among local and state governments who at least fear reduced tax collections because of a potential economic slowdown. Rampant foreclosures in some areas though, have inspired dramatic measures — for example, in Cuyahoga County, Ohio, and its county seat, Cleveland, which is second only to Detroit in failed mortgages. In an “I'm-mad-as-hell-and-I'm-not-going-to-take-it-anymore” move, Federal District Court Judge Christopher Boyko dismissed 14 foreclosure filings in the Cleveland area because those seeking to foreclose couldn't prove they actually owned the homes. Why? Because once a loan is made, it often is sliced and diced into complex securitized assets that issue bonds backed by those mortgages. Once Florida's investment pool or The Bank of China buys those bonds, then it becomes questionable as to who really owns the mortgage. In an even more striking move, Cleveland has sued 21 banks to recover hundreds of millions of dollars it claims to have lost from devalued property taxes and the money it has spent to demolish or board up abandoned homes.

The irony is that subprime loans — which give people with marginal credit a chance to own a home — and asset backed securities — which spread the risk of those loans — are still good concepts whose failure can be all too easily blamed on the greed of the lenders and those who willingly, if unwittingly, took the loans. In too many cases, though, both borrowers and lenders were left to their own devices, unchecked by self regulation or government oversight. As a result, from China to Cleveland, those acts have soured the otherwise sweet dream of home ownership.