3. Double Downgrade
Standard & Poor's has had a very poor week. On Tuesday, the New York credit rating agency finally swung into action on the sinking market for subprime mortgages. The firm said it was reviewing some $12 billion worth of residential mortgage securities for a possible downgrade. The timing raised eyebrows, since the market for subprime loans -- mortgages issued to homebuyers with poor credit histories -- blew up several months ago. Rising defaults and delinquencies took down dozens of small lenders and a few big ones. The biggest blow-up was New Century Financial (NEWCQ Quote), which filed for Chapter 11 more than three months ago. "Why now?" one fund manager asked on S&P's Tuesday morning conference call. "Delinquencies have been a disaster for many months. It couldn't be that you just woke up to it." Don't put anything past S&P, though. The firm quietly admitted Thursday that the ratings watch actually covers just $7 billion worth of securities -- not $12 billion as reported Tuesday. The $5 billion miscalculation didn't exactly help S&P's cause with its Wall Street skeptics. The company had said Tuesday that it held off on reviewing the ratings because delinquency data needed more "seasoning." But there's no sugar-coating it: S&P has been asleep at the switch.
Dumb-o-Meter score: 88. "It was an error and we corrected it," an S&P spokesman told Reuters on Thursday. "It was human error. It is what it is."
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| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 10,197.47 | 1,087.24 | 2,149.02 | 34.46 |
Oil *
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DOWN
93.79
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DOWN
11.27
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DOWN
17.88
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0.28
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10 Yr
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SPDR Gold
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