10 July 2007

Ratings Cuts By S&P, Moody's Rattle Investors

I'll try not to link through to pay/subscription sights too often, but today the WSJ webiste is free.

Ratings Cuts By S&P, Moody's Rattle Investors - WSJ.com
Critics Say Companies Are Reacting Too Late To Subprime Debt Woes
July 11, 2007

The widening meltdown in the subprime-mortgage market caught up with the nation's two big debt-rating companies yesterday, with Standard & Poor's and Moody's announcing plans to downgrade hundreds of bonds backed by the risky home loans.

The moves jolted jittery financial markets as investors adjusted to the idea that the downturn in the nation's housing market is worsening and that a rebound might be months away, at best. The Dow Jones Industrial Average tumbled 148.27 points , or 1.1% , to close at 13501.70 as investors fled stocks and low-quality bonds , and some of them criticized the ratings giants for being too slow to act.

In an acknowledgment that it severely misjudged the risk of bonds tied to subprime mortgages, Standard & Poor's Ratings Service said it is looking to slash credit ratings on as many as 612 such bonds, with a value of $12 billion, because of mounting delinquencies on the underlying mortgages. Subprime mortgages are made to borrowers with shaky credit profiles."

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