I posted this on July 29, quoted from Bloomberg:
Downgrades by S&P, Moody's and Fitch would force hundreds of investors to sell holdings, roiling the $800 billion market for securities backed by subprime mortgages and $1 trillion of collateralized debt obligations, the fastest growing part of the financial markets.Today it's coming true . . .
``You'll see massive losses from banks, insurance companies and pension managers,'' said Joshua Rosner, a managing director at investment research firm Graham Fisher & Co. in New York and co-author of a study last month that said S&P, Moody's and Fitch understate the risks of subprime mortgage bonds. ``The longer they wait, the worse it's going to be.''
Standard & Poor's said it expects the majority of the 612 classes of mortgage-backed securities it put under review Tuesday to be downgraded "beginning in the next few days."From Rex Nutting, Washington bureau chief at MarketWatch:
S&P's announcement is a death warrant for the subprime industry. No longer will mortgage brokers be able to help buyers lie their way into a home. Fewer stressed homeowners will be able to refinance their mortgage, thus extending and exacerbating the housing bust.
3 comments:
12 billion? I think that is just the tip of the iceberg
This story gives me chills (although at times I try to convince myself it's not as scary as my subconscious mind thinks it is). It's covered over at Ben's blog, Calculated Risk, and others in more detail, of course.
I am more scared at what our goverment will do if they try to fix it.
I hope that special intrests dont push our government into a bailout or other unresponsible program that punishes responsible people and rewards those who have acted greedy and/or stupid.
The worst thing Bernanke could do is lower rates. I hope he raises them slightly.
I think Bernanke said that today in his speed that the government isnt in the business of popping bubbles, but since they arguably started all this (they = greenspan) by lowering rates in the early 2000's, does that mean they will only create and perpetuate bubbles?
I think the most responsible thing our government can do is persue those who commited fraud within the law, tighten lending criteria (20% down required, so people are personally invested in keeping their house), for freddie, fannie, FHA, and whatever other gov. sponsored agencies there are. Other than that they should sit back and let people learn something from this.
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