Downey's Cushion Not So Soft After All

Downey Financial(DSL Quote) may soon join the growing list of financial institutions seeking an additional capital cushion against souring loans.

Downey, the holding company for Downey Savings & Loan, on Monday reported a $247.7 million first-quarter loss fueled by another huge increase in bad loans. Moody's on Tuesday downgraded the holding company's senior debt from Baa2 to Ba1, with a negative outlook.

In another recent piece, I noted Downey's loan quality wasn't quite as bad as it appeared on the surface, since performing loans that were restructured to benefit borrowers were required by accounting rules to be reported as problem loans. ...