“But the bigger news is that S&P isn’t going along with the charade anymore. S&P said it would change its methodology for rating hundreds of billions of dollars in residential-mortgage-backed securities. And it would review its ratings on hundreds of billions of dollars in the more complex collateralized debt obligations based on those subprime loans. A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.”
Basically they are re-pricing many portfolios due to the Bear Stearns blow up. I found this quote on a chatboard;
“these downgrades will cause a ripple effect in the hedge funds. Even if retail investors don’t care, the fundies have limits based upon debt ratings..and they have been the driving force behind the largest credit and housing bubbles in history. Goodbye mega-liquidity and home refi party”
I guess to answer your question this is old news that wasn’t supposed to come out.
