s&p at it again

[rdking647]

how can these people still be in business?

s&p is about to rate another group of sub prime mortgages AAA
these are mortgages held by people with only a 3.4% equity stake in their houses and below average credit scores...
these people should be banned from the ratings business



http://www.bloomberg.com/news/2011-08-31/subprime-mortgage-bonds-getting-aaa-rating-s-p-denies-to-u-s-treasuries.html

[Shagbark Hickory]

1. I think they were pretty generous with our rating too. nm

[RKP5637]

2. My hunch is we're going to go through this entire F'en mess again. n/t

[drm604]

3. So they downgrade government bonds

but rate sub prime mortgages AAA.

Maybe people will wake up and stop taking their ratings seriously.

[Gin]

4. they get paid by the companies/organizations they rate...

so I figure the mortgage bankers org. bought that rating..

[rdking647]

5. they should have their authority as a NRSRO pulled

thats the designation thats makes their ratings mean anything.. without it they will lose their credit rarings business.
right now there are 10 NRSRO's. we can live with 9


(without the designation a financial institution cant use their ratings for capital ratios or risk measurement)

[unblock]

6. without knowing the structure, in particular the reserve levels, it's ludicrous to criticize this

if no matter how sick the UNDERLYING asset is, it's often possible to create a very secure investment out of it simply by making the reserve large enough.

a security that pays $1,000,000 but is backed by $1,000,000,000 of collateral is incredibly secure, even if the collateral is highly suspect for the simply reason that even if 99% of the collateral is completely wiped out, you still have 10 times the amount you need to repay the investor.


now, if there reserves are set at the same levels as they typically were prior to the credit crunch, then yes, AAA would be ridiculous. but ratings are based on historical averages and stress factors. as we all know, the historical averages have gotten way worse, and i suspect the stress factors have gotten bigger as well. so i'm quite sure that the reserves are substantially larger than the reserves would have been pre-crisis.

exactly what those levels are is the key question.

[Liberal_in_LA]

7. k&r