However, such actions were unable to prevent rapid falls in asset prices as institutions sought to relieve themselves of these risky burdens and replenish their risk-weighted capital ratios. When, in a single day, S&P slashed its ratings on two sets of AAA bonds backed by residential mortgage securities to CCC+ and CCC, instantly changing their status from top quality to pure junk. 3 This represented an immediate and severe dislocation of the financial markets: The odds are only about 1 in 10,000 that a bond will go from the highest grade, AAA, to the low-quality CCC level during a calendar year. The financial turmoil that engulfed the US during 2007-09 began in the mortgage lending markets. 9tr2 of mortgage-backed securities received downgrades to reflect the reassessment of their risk. he Dow Jones Industrial Average (Dow) – an index composed of 30 of the largest publicly-listed companies, including a number of large banking institutions – saw tumultuous shifts almost daily and registered its largest ever single-day point drop in value on 29 September
However, such actions were unable to prevent rapid falls in asset prices as institutions sought to relieve themselves of these risky burdens and replenish their risk-weighted capital ratios. When, in a single day, S&P slashed its ratings on two sets of AAA bonds backed by residential mortgage securities to CCC+ and CCC, instantly changing their status from top quality to pure junk. 3 This represented an immediate and severe dislocation of the financial markets: The odds are only about 1 in 10,000 that a bond will go from the highest grade, AAA, to the low-quality CCC level during a calendar year. The financial turmoil that engulfed the US during 2007-09 began in the mortgage lending markets. 9tr2 of mortgage-backed securities received downgrades to reflect the reassessment of their risk. he Dow Jones Industrial Average (Dow) – an index composed of 30 of the largest publicly-listed companies, including a number of large banking institutions – saw tumultuous shifts almost daily and registered its largest ever single-day point drop in value on 29 September