S&P lowers credit rating of WaMu

Standard & Poor’s Ratings Services cut Washington Mutual Inc.‘s credit rating Thursday, saying the mortgage crisis was worse than it predicted at the start of the year.

“We now believe that the severity of losses on all residential mortgages will be higher than we had thought and that the weak housing market will now be a longer cycle,” S&P analyst Victoria Wagner said in a news release.

S&P also darkened its view of the health of the overall economy, which it expects will push more people to default on loans and slice into Seattle-based WaMu’s earnings.

•Federal regulators say they will seek a $10.2 million penalty against Southwest Airlines for failing to inspect older planes for cracks and then letting the airplanes fly before inspections were done.

The FAA said Thursday that Dallas-based Southwest operated nearly 60,000 flights using 46 planes that had not been inspected for possible fatigue-related cracking on the fuselage. The inspections were ordered in 2004.

The airline says it complied with regulators’ requests and thought the case was closed last year. A spokeswoman says the airline will contest any fine.

•Circuit City Stores Inc. is getting on the Blu-ray digital video format bandwagon by tripling the period in which customers who purchased a rival HD DVD player can return them.

The nation’s No. 2 electronics retailer has instructed its stores to accept returns of HD DVD players within 90 days of purchase, spokesman Jim Babb said.

Several industry moves in recent weeks — including the announcement by creator Toshiba Corp. that it has stopped making HD DVD players and discs — have handed the format a clear defeat in the battle for primacy in the next generation of movie-disc technology.

•Crocs Inc. shot down speculation Thursday that its colorful funky footwear with scattershot holes will be sold by Costco Wholesale Corp.

The Niwot, Colo.-based shoe manufacturer has found some cases where it believes its products were sold indirectly to Costco, Chief Executive Officer Ron Snyder said.

“We have not sold Crocs-branded products to Costco nor have we authorized any of our customers to sell our products to Costco,” Snyder said in a statement. Snyder’s statement came a day after Richard Galanti, chief financial officer of Issaquah, Wash.-based Costco, told analysts that his company buyers are seeing more brands they historically could not access, including “name-brand jeans and name-brand women’s apparel and Crocs and the like.”