John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (8524)	12/6/2007 11:53:30 PM
From: Hawkmoon	Read Replies (1) of 33421

Excellent response!!! And I'm especially glad you didn't forget to mention the rating agencies. Afterall, they are the ones who "arbitrarily" set the ratings for those CDOs/CMO, each containing a certainly percentage of sub-prime exposure per tranche. Risk assessment, management and risk mitigation was completely passed off to other financial entities with the complicity of the rating agencies who developed a somewhat incestuous relationship with the investment clients that were paying vast fees to the rating agencies for credit quality ratings that were in number of cases knowingly overstated. It would seem to me that the rating agencies could possess pecuniary liability for the ratings they gave to those tranches. So is it little wonder they are suddenly reversing course and being extremely conservative as they downgrade the debt? Now they are working for the banks who want to buy it back at the lowest price possible.. Btw.. I'm no big fan of deflationary spirals. Deflation over time, due to productivity and efficiency?? Yes.. But deflation that pulls the rug out from under all those people who were forced to buy houses in these manipulated real estate markets (you have to live somewhere, right)?? NO.. Unqualified people were "enticed" to buy houses and that increase the cost for all of us. Fortunately, when I returned from Iraq 2 years ago, I chose not to buy a house, recognizing that property values were too high in the DC area. But for those folks who have families, a house is almost a necessity. And sadly, they are paying the cost for these excesses along with those borrowers who took out sub-prime loans. Hawk

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