Susan Barnes on subprime stresses being contained (2007)

Due to minor home price declines in 2007, we expect losses and negative rating actions to keep increasing in the near term relative to previous years.  However, as long as interest rates and unemployment remain at historical lows and income growth continues to be positive, we believe there is sufficient protection for the majority of investment grade bonds.  As of April 12, 2007, only 0.3 percent of the outstanding subprime ratings issued in 2006 have been downgraded or placed on Creditwatch.

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Let me conclude by stating S&P does not anticipate pervasive negative rating actions on financial institutions due to rising credit stresses in the subprime mortgage sector since the majority of rated financial institutions have diversified assets and mortgage lending and servicing operations aligned with strong interest rate and credit risk management oversight. Specialty finance companies that focus solely on the subprime market, however, do not enjoy the same protection and have felt the effects of the current subprime credit stresses.

~ Susan Barnes, managing director, Standard & Poor's Ratings Services, hearing before the Committee on Banking, Housing, and Urban Affairs, United States Senate, April 17, 2007