Joined Nov 11, 2007
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S&P rates subprime mortgages higher than U.S. government

Look I definitely am skeptical about the quality of U.S. paper, whatever the bond market thinks. But this just continues to beckon the question: why is anyone, most especially regulated mutual funds, supposed to take what the agencies have to say seriously?

Read here:

Standard & Poor’s is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government.

S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties. New York-based S&P stripped the U.S. of its top rank on Aug. 5, saying Washington politics were making the country less creditworthy.

Treasuries gained about 1.95 percent and U.S. borrowing costs have fallen to record lows as investors repudiated the downgrade, according to Bank of America Merrill Lynch indexes. S&P has awarded AAAs to more than $36 billion of securities in the U.S. this year that were created by bankers who continue to gather thousands of loans, bundle them into bonds of varying risk and pay ratings firms a fee to assign credit rankings.

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One comment

  1. drummerboy

    they hold them in high regard because they know that some of the homes,in a lot of different regions have had the same address for the last 65 years,and will last another 65 years. by then that paper wont be toxic and that address will be whole again.you and i wont be here,but just the same.those address’ will be, all with new owners and all with 30 year morts. and the beat goes on

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