We know there's a joke in this, or perhaps poetic justice, but the fact that credit woes emanating from the U.S. are continuing to wreak havoc on France's largest banks must be a never-ending source of frustration for a country well known for its love/hate relationship with the States. More U.S.-led pain came in the form of Q2 earnings at major French banks on Thursday, with Credit Agricole SA, France's third-largest bank, revealing that second-quarter profit dropped 94 percent on writedowns tied to U.S. bond insurers. Bloomberg News reported that the bank has so far announced 6.5 billion euros of write-downs. Not to be outdone, Natixis SA, another French bank, reported a net loss of 1.02 billion euros ($1.5 billion) for the second quarter on 1.51 billion euros ($2.22 billion) of markdowns on debt backed by bond insurers and subprime-linked securities. The bank said it is focused on raising 3.7 billion euros ($5.5 billion) in new capital, according to a separate Bloomberg story, making it the latest bank to turn to investors as U.S.-led losses mount. Fellow French bank Societe Generale SA, as well as Credit Agricole, have also turned to shareholders for more capital this year. U.S. bond insurers like MBIA Inc. (MBI) and Ambac Financial Group, Inc. (ABK) provided the top-rated portions of private-party RMBS and related CDO deals with a guarantee that essentially was designed to serve as a proxy for the government guarantee that exists on Fannie/Freddie/Ginnie mortgage bond issues. But the strength of that guarantee is only as good as the rating of the firm that provides it — especially for banks, who now must account for counterparty downgrades in their estimates of exposure to such toxic financial instruments as collateralized debt obligations. While market response to each bank's latest write-downs varied depending on whether analyst expectations were missed or bettered -- and the degree to which investors are worried about solvency -- it's worth remembering that the current mortgage and housing crisis here in the U.S. still has large effects overseas, as well. After all, U.S. investment and commercial banks weren't the only institutions involved in snapping up cheap mortgage debt and related derivatives, and/or wrapping it with a guarantee that has proven to be more costly than anyone had imagined at the time. As HW reported earlier on Thursday, most analysts now expect that the U.S. financial market has at least two quarters to go before any discussion of emerging from the current downward earnings cycle can begin to take place. Such sentiment seems likely to flow through to international banking operations, as well. Disclosure: The author held no positions of relevance when this story was published; indirect holdings may exist via mutual fund investments, as well. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.