Why, more than a year into the crisis
do regulators and investors continue to rely on ratings?
No one has been more wrong than [two ratings agencies]
Less than a year ago both gave high ratings
to 11 of the largest distressed financial institutions…
…They rated Lehman Brothers an A just a month before it collapsed
Until recently, the agencies maintained AAA ratings
on thousands of nearly worthless subprime-related securities
Jerome Fons and Frank Partnoy
Rated F for Failure
New York Times, March 16, 2009
Via The Big Picture
Why did so many who shouldn’t have
believe sub-prime mortgages could be repackaged into bonds
with similar credit risk characteristics as AAA US Treasuries?
These errors make us look either incompetent at credit analysis
or like we sold our soul to the devil for revenue or a little bit of both
A rating agency managing director
responding anonymously to an internal management survey
September 2007
Why would a ratings agency change relatively negative views to positive
on some mortgage backed securities
even though no new and significant information emerged?
Employee #1 By the way, that deal is ridiculous
Employee #2 I know, that model definitely does not capture half the risk
#1 We should not be rating it
#2 We rate every deal
It could be structured by cows and we would rate it
Instant Message conversation between two rating agency employees
Why would the Securities and Exchange Commission
let banks base capital requirements on ratings derived by companies
dependent on the same firms for future revenue?
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