Year of "denial" in U.S. subprime crisis

By Jennifer Coogan

NEW YORK (Reuters) - One year after the first alarm bells of the subprime mortgage crisis rang on Wall Street, many of its victims are trading at half their value or less, while others have long been buried.

On February 8, 2007, HSBC (HSBA.L: Quote, Profile, Research) said it would take a charge of about $10.6 billion on subprime loans. The evening before, the No. 2 U.S. subprime lender, New Century Financial Corp NEWCQ.PK, had unexpectedly warned it faced a quarterly loss and said it would restate previous earnings.

New Century shares lost more than a third of their value on February 8, but to look at the overall market, there was no telling how big a toll the crisis would take on the U.S. stock market. The S&P 500 shed less than 2 points that day.

By spring, the stocks of subprime lenders were falling into a death spiral and dropped from the major exchanges in steady succession.

On April 2, New Century filed for bankruptcy protection. American Home Mortgage Investment Corp AHM.N followed in August. Accredited Home Lenders Holding Co LEND.O was bought out by a private equity firm in October.

Countrywide Financial Corp CFC.N, the nation's No. 1 lender, hit a high of $44.92 on February 7, 2007. The shares are now trading at $6.58 as it awaits a takeover by Bank of America Corp (BAC.N: Quote, Profile, Research).

But despite the bloodbath in the mortgage finance sector, investors last autumn were still confident enough that the subprime debacle was contained that they pushed both the Dow and S&P 500 to lifetime highs on October 11.

From its intraday high on October 11 to Friday's close, the S&P 500 index has fallen 15.5 percent.