Bernanke, Kudlow, scruffy dog and other wise analysts said everything’s ok, it’s contained, subprime wouldn’t affect other markets!!!
“We believe the effect of the troubles in the subprime sector on the broader housing market will be limited and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.” -Bernanke
After appearing to subside last week, the recent mess in the subprime mortgage sector re-emerged Tuesday after the credit rating agency Standard & Poor’s said it will cut $12 billion of subprime-related debt, saying it expected more delinquent and defaulted U.S. home loans.
After the market close, fellow credit rating agency Moody’s cut its rating for 399 residential mortgage-backed securities, which were backed by subprime loans.
Shares of investment banks and other financial firms slipped on the news as shares of J.P. Morgan Chase (down $1.28 to $47.51, Charts, Fortune 500) and Goldman Sachs (down $6.22 to $217.08, Charts, Fortune 500) both fell nearly 3 percent. Bear Stearns (down $5.93 to $137.96, Charts, Fortune 500), which nearly faced a collapse last month of two hedge funds heavily invested in securities backed by subprime mortgages tumbled over 4 percent.
