S&P: U.S. Subprime Crisis Will Not Peak Until 2009, “We Underestimated the Extent to Which Fraud Was Occurring in the Industry”
October 10th, 2007Via: Reuters:
The U.S. subprime housing crisis will not peak until 2009, rating agency Standard and Poor’s said on Tuesday, adding it had underestimated the extent of fraud in the industry.
S&P expected the world economy to grow 3.6 percent in 2007 and 3.5 percent in 2008, with emerging market economies driving growth. The U.S. economy would lag at 2 percent in both years, down from 2.9 percent in 2006.
Housing was the major weakness in the U.S. economy and the subprime crisis — which roiled global markets in late July and August — was far from over, although its shock value was wearing off, David Wyss, S&P’s chief economist, said in Mumbai.
“We underestimated the extent to which fraud was occurring in the industry,” he said.
“It looks, based on some surveys that had been done, the extent of frauds increased sharply in 2006.”
S&P said the U.S. Federal Reserve had estimated that subprime losses could reach $150 billion, and Wyss said that would feed through to unemployment and remain a brake on growth.
“We think in the United States the housing market is not going to bottom until winter. We think the losses in these sectors won’t really hit their peak until 2009,” Wyss said.
“We are not halfway through with this crisis yet.”
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