Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble,

[LA_Renter]

Wow! This is something we have been predicting and waiting for. This is first bout of sanity I have seen out of the markets for years now. Do you think S&P was under any pressure here?? Check out the wording.

WASHINGTON (MarketWatch) — Standard & Poor’s just drove a huge harpoon into the heart of the mortgage credit bubble, and it’s going to take a long time to clean up the mess once the beast finally dies.
S&P, one of the three main credit-rating agencies that served as enablers of the subprime-mortgage boom, announced Tuesday that it would lower its ratings on 612 bonds, a small portion of the mortgage-backed securities it had given its seal of approval to. See full story.
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.
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.
“We do not foresee the poor performance abating,” S&P said.
Prices will fall, and foreclosures will rise. More mortgage fraud will be uncovered as the tide goes out.
And hedge funds will have to find another way to beat the market — if they survive this blow, that is.
— Rex Nutting, Washington bureau chief

http://www.marketwatch.com/news/story/sp-finally-says-subprime-mostly/story.aspx?guid=%7BDFBA4993%2D031E%2D4E88%2D8F56%2D5B08FD9AA07D%7D

Sounds like the hammer is coming down!

[drunkle]

i notice that pension funds keep getting mentioned in these kinds of articles. what kind of holy hell is going to be raised when people find their pensions slashed or belly up?

[drunkle]

i notice that pension funds keep getting mentioned in these kinds of articles. what kind of holy hell is going to be raised when people find their pensions slashed or belly up?

[Nonbeliever]

No kidding. I think a lot of people perceive some sort of financial security blanket in their future that will not be there in the near future. Should be about as fun to watch as a good fireworks show.

[Nonbeliever]

No kidding. I think a lot of people perceive some sort of financial security blanket in their future that will not be there in the near future. Should be about as fun to watch as a good fireworks show.

[eyePod]

Harpoon?

[eyePod]

Harpoon?

[waiting hawk]

Article should have been writen on Feb 27th 07

[waiting hawk]

Article should have been writen on Feb 27th 07

[LA_Renter]

From Bloomberg
`Why Now?’

“I’d like to know: Why now?” Steven Eisman, a portfolio manager at Frontpoint Partners in New York said on a conference call hosted by S&P to discuss the possible ratings changes. “The news has been out on subprime now for many, many months. The delinquencies have been a disaster for many, many months. The ratings have been called into question for many, many months. I’d like to know why you’re making this move today instead of many months ago.”

Tom Warrack, an S&P managing director, said it takes time for performance to show through.

“We have been surveilling these deals actively on a regular basis beginning in 2005 and 2006,” Warrack said on the call. “We believe that the performance that we’ve been able to observe now warrants action.”

In response to the investor criticism, executives at S&P, Moody’s and Fitch have said they were waiting until foreclosure sales of homes proved that the collateral backing the bonds has declined enough to create losses.

Fran Laserson, a spokeswoman for Moody’s, and James Jockle, a spokesman for Fitch, said they had no immediate comment.

Huh!!

[LA_Renter]

From Bloomberg
`Why Now?’

“I’d like to know: Why now?” Steven Eisman, a portfolio manager at Frontpoint Partners in New York said on a conference call hosted by S&P to discuss the possible ratings changes. “The news has been out on subprime now for many, many months. The delinquencies have been a disaster for many, many months. The ratings have been called into question for many, many months. I’d like to know why you’re making this move today instead of many months ago.”

Tom Warrack, an S&P managing director, said it takes time for performance to show through.

“We have been surveilling these deals actively on a regular basis beginning in 2005 and 2006,” Warrack said on the call. “We believe that the performance that we’ve been able to observe now warrants action.”

In response to the investor criticism, executives at S&P, Moody’s and Fitch have said they were waiting until foreclosure sales of homes proved that the collateral backing the bonds has declined enough to create losses.

Fran Laserson, a spokeswoman for Moody’s, and James Jockle, a spokesman for Fitch, said they had no immediate comment.

Huh!!

[waiting hawk]

lol good one LA Renter

[waiting hawk]

lol good one LA Renter

[LookoutBelow]

Remember this poignant quote:……"Those inside the bubble cannot see out"

[LookoutBelow]

Remember this poignant quote:……"Those inside the bubble cannot see out"

[Author]

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