Analysts: Subprime Woes Not Over Yet

Subprime shakeout: New Century Financial had its NYSE trading suspended on Tuesday, facing delisting and an SEC accounting probe. Everyone suddenly seems to agree that the high-risk mortgage sector is in flux. Two analysts joined "Closing Bell" to talk about the current environment -- and what they see happening in the near future.

Zach Gast, of the Center for Financial Research and Analysis, said his colleagues had watched the sector "slowly deteriorate" over a year and a half -- and in November "called out New Century in particular" as a candidate for future trouble.

Gast cited liquidity as the factor that hurt many lenders in the late 1990s -- and one that will drive lenders out of business today.

And if subprime spills over into the rest of the mortgage market, don't count on a Federal Reserve rate cut to fix everything: Portales Partners' Gary Gordon does foresee a Fed cut; but even if rates are lower, lenders are still tightening standards -- so a lot of people who participated in the market in recent years will now be "cut out."

Gordon believes that "lenders will be fighting the Fed for some time," with the ripples affecting such secondary areas as building materials and household products. And he added a dark prediction: Such ripples mean it's likely that the U.S. has a "50/50 chance" of recession.