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walkitoutAnd, possibly, a _whole_ lot of other people at S&P.
http://www.businessweek.com/news/2011-08-30/subprime-mortgage-bonds-get-aaa-rating-from-s-p-denied-to-u-s-.html
Same article here:
http://www.bloomberg.com/news/2011-08-31/subprime-mortgage-bonds-getting-aaa-rating-s-p-denies-to-u-s-treasuries.html
The rationale being used for rating these AAA are the usual: the loans won't all go bad at once, and the AAA portion is tiny and unlikely to be chewed on anyway.
Bloomberg TV coverage likes this quote:
"“These are errors that could cause airplanes to crash if this was aerospace engineering,” said Sylvain Raynes, a principal at R&R Consulting in New York and a former analyst at Moody’s Investors Service."
There's a theory about rating sovereign debt that says (I'm summarizing very crudely here) that anything denominated in or sufficiently dependent upon that sovereign continuing functioning must be rated no higher than the sovereign debt. When S&P downgraded US debt, a bunch of other people looked at stuff they were rating to figure out if they should down-adjust it to reflect that downgrade. I'm not sure anyone really followed through on it, tho, particularly after Fitch and Moody's decided not to wade into that particular pond.
I've tried really hard to understand MBSs and CMBSs. I can produce approximately the same level of soundbite summary in any given instance that any of the punditry can, but I don't feel like I have an understanding of that kind of securitization that gives me any confidence that risk in the underlying security "goes away". These things work on the you-don't-have-to-outrun-the-bear-just-the-guy-you're-hiking-with theory. Unfortunately, where there's one bear to outrun, there might be more.
http://www.businessweek.com/news/2011-08-30/subprime-mortgage-bonds-get-aaa-rating-from-s-p-denied-to-u-s-.html
Same article here:
http://www.bloomberg.com/news/2011-08-31/subprime-mortgage-bonds-getting-aaa-rating-s-p-denies-to-u-s-treasuries.html
The rationale being used for rating these AAA are the usual: the loans won't all go bad at once, and the AAA portion is tiny and unlikely to be chewed on anyway.
Bloomberg TV coverage likes this quote:
"“These are errors that could cause airplanes to crash if this was aerospace engineering,” said Sylvain Raynes, a principal at R&R Consulting in New York and a former analyst at Moody’s Investors Service."
There's a theory about rating sovereign debt that says (I'm summarizing very crudely here) that anything denominated in or sufficiently dependent upon that sovereign continuing functioning must be rated no higher than the sovereign debt. When S&P downgraded US debt, a bunch of other people looked at stuff they were rating to figure out if they should down-adjust it to reflect that downgrade. I'm not sure anyone really followed through on it, tho, particularly after Fitch and Moody's decided not to wade into that particular pond.
I've tried really hard to understand MBSs and CMBSs. I can produce approximately the same level of soundbite summary in any given instance that any of the punditry can, but I don't feel like I have an understanding of that kind of securitization that gives me any confidence that risk in the underlying security "goes away". These things work on the you-don't-have-to-outrun-the-bear-just-the-guy-you're-hiking-with theory. Unfortunately, where there's one bear to outrun, there might be more.