"Last week I was a participant in the Wall Street Journal's Future of Finance Initiative in England. WSJ has written a summary of the conference highlights, and missed some key points. Allow me to fill in the blanks." - Janet Tavakoli
Dodd's bill - while sounding good - is really an all-out attempt to save the current, broken system...
CRE Update: CMBS Deterioration Accelerates, L.A.'s 550 South Hope Tower Appraised At Half 2007 ValueSubmitted by Tyler Durden on 10/25/2009 13:24 -0400
August CRE trends continued their downward trends, with a bevy of trackers of CMBS performance, Moody's, Fitch, Realpoint and TREPP seeing substantial deterioration in September. According To TREPP the August delinquency rate was up to 4.35% from 4.03. Legacy rating agencies Moody's and Fitch indicated a comparable acceleration in delinquency trends, with September 60-delinquencies at 3.64% and 3.58%, up from 3.04% and 3.23% respectively. New CRE NRSRO Realpoint had an even higher September reading at 4.15% up from 3.47% in the previous month.
The New York Fed, concerned about what happens when it can no longer monetize treasuries, has decided to adjust its TALF fall back plan which so far has seen virtually no use, compliments of a free-liquidity guzzling equity market. So Messrs Bill Dudley et al are taking appropriate steps for the next part of the move higher, and have just issued an announcement, changing the "procedures for evaluating asset-backed securities pledged to the TALF." The reason: to "enhance the Federal Reserve's ability to ensure that TALF collateral complies with its existing high standards for credit quality, transparency, and simplicity of structure." It is refreshing that the NY Fed actually cares about lending taxpayer money where the collateral will presumably cover losses, courtesy of the upcoming CRE crunch.
It's not just rating agencies that are at the crossroads, but pension funds are at the crossroads too. We need a governance overhaul that introduces more transparency and a compensation system that rewards risk-adjusted returns. The status quo at rating agencies and pension funds is totally unacceptable.
Frequent Zero Hedge readers are aware of our fascination by the ethically pure and intellectually honest legacy rating agencies (read S&P and Moody's), whose primary goal in life is to provide readers of its reports with unconflicted, unbiased research, without regard for the top and bottom line of key Wall Street firms, which purely by accident happen to be the biggest sources of revenue to these same NRSRO via structured products which are spun off from the banks' balance sheets and sold to highly sophisticated, erutide yet unfortunately bankrupt island nations (which luckily have a monopoly on geysers and 6 foot tall women to feed their GDP). The complete transparency that shrouds the work of these rating agencies, and the integrity of its professionals is beyond reproach, and where, contrary to litigation disclosure, the phrase "let's hope we are all wealthy and retired by the time this house of cards falters", was massively taken out of context and was simply referring to an intern's attempt at recreating the Sistine Chapel using nothing but 10 decks of Bicycle cards.
Yes, that's 585%. No comment needed
Rare? Medium Rare? Medium? Well Done? S&P? Indeed, as the last peg in the gradation of burnt to a crisp, S&P smells completely done. As in there isn't even left a shadow of a doubt that all S&P does is pander to the solicitations of whatever few remaining clients it may have, or, as the case may be, the U.S. government. Any credibility S&P, which one would be excused for confusing with Sycophantic & Pathetic, may have tried to salvage over the past 6 months has been gutted and left to dry after this most recent fiasco, which is the final straw on theMcGraw-Hill subsidiary's expedited route to the NRSRO utterly discredited trash heap.
I get it, I really do: You enjoy your secure, mostly laid-back, relatively well-paying job. Insofar as you possess the capacity, experience, and inclination to comprehend the following though, please, enlighten me: Given this fact, don’t you think its in your best interest to get rid of nonsensical, self-defeating policies like the following (from CalPERS)?
"Counterparty creditworthiness, for non-exchange traded Derivatives (Anal_yst: substitute any asset/asset class here), shall be at a minimum of “A3” as defined by Moody’s, “A-” by S&P and “A-“ by Fitch...?"
Dear Pension/Endowment/etc Trustees and Investment Committees:
I understand you enjoy your secure, relatively well-paid job, and your forgivable desire to maintain this status-quo for as long as possible. So long as you like your job and want to keep it, don’t you think its in your best interest to get rid of nonsensical, self-defeating policies like the following (from CalPERS)?
A lot has been said recently over the much-maligned traditional rating agencies: S&P and Moody's. The rampant conflicts of interest over the past decade which everyone on Wall Street was all too aware of, somehow were a shock to politicians such as Barney Frank. In fact these very conflicts have been proposed to be the root of the credit and mortgage crisis (one can see how that is not a futile argument: if an excel workbook crashes your PC if you try to assume declining housing prices someone should have raised a red flag somewhere). Of course, that is a naive conclusion but not entirely without merit. In fact, odds are that the next time the market swoons by 40-60%, Barney Frank will refocus populist anger at exactly these rating agencies which have so far managed to escape relatively unscathed.
A lot has been said recently over the much-maligned traditional rating agencies: S&P and Moody's. The rampant conflicts of interest over the past decade which everyone on Wall Street was all too aware of, somehow were a shock to politicians such as Barney Frank. In fact these very conflicts have been proposed to be the root of the credit and mortgage crisis (one can see how that is not a futile argument: if an excel workbook crashes your PC if you try to assume declining housing prices someone should have raised a red flag somewhere).
As Zero Hedge expected a few short weeks ago, the Fed realized that its TALF revision 364.5 for CMBS was worthless, so today, after many deep thoughts on how to force feed U.S. taxpayers even more toxic garbage, the wise and grizzled Ben Bernanke issued TALF directive 364.6 and decided to extend the acceptance threshold to all past legacy CMBS loans as eligible for TALF.