here are your A rated products in action… don’t ask about sub-A:
http://www.markit.com/cache/curves/12df287f6975f277a30f272f618.png
S&P May Cut Subprime Ratings - Forbes.com
Standard & Poor’s is considering cutting the credit rating of more than $12 billion in bonds backed by risky home loans as more borrowers miss payments, the ratings agency said Tuesday.
These bonds - sold by some of Wall Street’s biggest banks - represent a principal source of financing for the housing market.
Lower ratings for mortgage-backed bonds could cause a domino effect that might ultimately strangle what until this year was a major propellent of home prices: access to easy money.
Standard & Poor’s Ratings Service, the credit-rating division of McGraw-Hill Cos., said it may slash its rating on 612 classes of mortgage-backed bonds issued by such banks as Citigroup Inc., Bear Stearns Cos., Lehman Brothers Holdings Inc., Morgan Stanley, Merrill Lynch & Co., and JPMorgan Chase & Co.
S&P is focusing on bonds backed by subprime mortgage debt, or loans to people with spotty credit histories. The bonds, issued in late 2005 and much of 2006, are backed by subprime home loans. Subprime borrowers collectively have missed a lot more payments on loans amid higher interest rates and a slowdown in the economy.
S&P adjusted its method for rating subprime mortgage-backed bonds to assume more missed payments and mortgage fraud. The ratings agency said it now has enough data to examine how loans issued during this period will perform.
S&P said it is now drawing a stronger correlation among different levels of risk. If one level of credit begins to show cracks, the next level up needs to demonstrate it is better-protected from default risks to maintain its rating.
The subprime mortgage industry has deteriorated more drastically than expected, S&P said, and it does not expect poor credit performance to improve soon. Subprime lenders adopted more lenient lending standards during the housing run-up, S&P said, and many home buyers painted a false picture of their credit when they borrowed money.
This review also affects collateralized-debt obligations, which are complex securities that splice a lot of different kinds of debt into layers of risk.
The subprime mortgage market began collapsing in February when HSBC Holdings PLC and New Century Financial Corp. reported mounting payment defaults had choked a lot of value from the banks’ loan portfolios.
Dozens of subprime lenders have since gone bankrupt as banks have become more reluctant to put money behind risky mortgage loans.
S&P chief economist David Wyss said he expects an 8 percent decline in home prices between 2006 and 2008. Lower home prices can exacerbate credit problems because people having trouble repaying their loans cannot tap the equity in their homes for as much cash.
Which totally ignores the consequences of this happening during the tenure of a president who is facing an unheard of 18 months of lame duck status… lame duck periods are highly vulnerable to destabilizing shocks because there is no effective leadership... and all of the president’s men are fending off congressional inquiry, nobody is watching the store… and that’s a frightening thing…
Secondly, Iraq is going from terrible to hideous and not a soul has a freaking idea of what to do… pretend as they may… we’ve blown half a tril for the privilege of blowing up a bunch of mud brick houses and unleashing chaos…
So you have this background of generally disintegrating policy:
No plan for immigration
No plan for healthcare
No plan for iraq
No plan for subprime breakdown
So, this leaves us where ? 
That’s an understatement… if there ever was one… because there is such a massive add-on industry, all the upgrade and fixup stores, the Home Depots, the paint manufacturers, the real estate brokers, the contractors, the guys selling new pickup trucks to contractors (maybe you’ve noticed that now every contractor has a new, some fancy indeed, pickup truck… bought on credit, naturally, with the expectation of…)
If the 1.6 multiplier holds for protracted market upswings, take every dollar spent on a house and multiply by 1.6 for its full economic effect, so a $500,000 house will inject $800,000 into the economy… the multiplier might get a lot sharper on the downswing, because people tend to grow their business relatively slowly but have to close up shop very quickly if conditions really nosedive… so a $500,000 house that has to be sold for $250,000 may have a “divider” effect of 2… so the house’s full positive impact from the sale would be $400,000 but the negative impact of the loss might be $1,000,000,000 [this is a mistake and corrected on the post below](the effect if the house and land had never existed from the beginning)… so the net economic effect of major markdown could be minus $600,000… which is the full systemic cost of maybe a bankrupcy filing, loss of title, economic disruption caused by the house having to go on the block and the folks who owned the house going back to poverty… by the year 2012 economists will have full sorted this one out… Boo Ya!
what was I saying ??..,a $500,000 house going for $250,000 could have a divider effect of a full $500,000 ( $250,000 loss times 2), while the multiplier effect of the sale is $400,000… so you have a net economic loss of $100,000, not $600,000… still not a pretty sight. 
I’m sure King George will fix everything, just ask either one of his supporters.
After all, he can blame it on the Democrats.
Understatement Department:
“Home Depot announced that its fiscal 2007 earnings will decline more than it had anticipated. And, its chief executive Frank Blake said, “We look at the overall market and say there’s still correction that lies ahead of us,” according to news wire reports”
Yeah… maybe just a wee thing…