Formerly About Advanced Micro Devices Message Board

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Politics : Formerly About Advanced Micro Devices

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To: SilentZ who wrote (468086)	4/1/2009 11:00:36 PM
From: Joe NYC	Read Replies (2) of 1576775

Z, Good article. Interesting part was that co-relations of defaults were derived from market pricing data of CDSs themselves, rather than from the historical records of the underlying instruments or events. One thing that was mentioned in quote (but not explained very well) was following: "When they stopped rising, pretty much everyone was caught on the wrong side, because the sensitivity to house prices was huge. And there was just no getting around it. Why didn't rating agencies build in some cushion for this sensitivity to a house-price-depreciation scenario? Because if they had, they would have never rated a single mortgage-backed CDO." What I think it means is that since the issuer can "shop" rating agencies, and the issuer pays the rating agencies, there is a potential (to say it gently) for lack of impartiality and for lack of objectivity. What I wonder is how the rating agencies are still standing as if nothing happened... Joe

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