Rating Agencies

Tyler Durden's picture

The CalPERS Lawsuit Against The Rating Agencies





The pre-emptive attack on the rating agencies has begun. As Zero Hedge has long suspected, once the next major leg down in the market occurs,populist anger will again have to be directed away from its true focal point- the intersection of Wall Street and DC. And since major investment banks such as Goldman have already suffered major reputational blows over the past several weeks, it behooves everyone to throw the straw man in the open... In other words, the next congressional lynching will focus exclusively on S&P, Moody's and Fitch, and likely will result in the end of one or more of the rating agencies. And last week's action by CalPERS is just the catalyst to get that particular avalanche rolling.

 
nickbarbon's picture

In Which the Civic Conscience of Rating Agencies Becomes Evident (CMBS)





Today saw fully $1.5 billion in CMBS bonds out for the bid from bank portfolios and insurance companies and CMBX AAAs down 2 points. Sellers were locking in price improvements, while buyers were loading up on bonds they think will tighten into a TALF/PPIP bid. But the real fun came from the rating agencies which downgraded or warned of downgrades all the way up the capital structure. S&P took several AAA-rated classes down tosingle-A or below, and Moodys was making noises about its own bout of upcoming downgrades. Given that AAA/Aaa ratings are needed for TALF eligibility, market consternation ensued.

What's happening is that the Rating Agencies have realized they are the arbiter of credit quality in TALF, on behalf of a Fed which, according to section 13 of the Federal Reserve Act of 1913, can't take on any credit risk. How else to explain the accelerated waiting periods between negative watch and downgrade? How awkward would it be if the AAA/Aaa bonds the Fed took on balance sheet were to inconveniently default! Better to downgrade into ineligibility now than testify before a congressional panel later.

 
Tyler Durden's picture

Rating Agencies Finally Get The NRUC Wake Up Call





When Zero Hedge first discussed the plethora of problems at National Rural Utilities Cooperative Finance Corporation (aka NRUC) over 4 months ago, two things happened very quickly: the company's CDS blew up from 100 bps to over 250 bps overnight, and the company promptly issued a derogatory press release ridiculing everyone and everything associated with Zero Hedge (they were the first but certainly not the last). Immediately thereafter, likely under the advice of counsel, NRUC promptly retracted the press release but not before The Business Insider managed to keep a record for posterity.

In retrospect this may have been a smart move after Fitch just put the company on downgrade review for very much the same reasons I was concerned about in March.

 
Tyler Durden's picture

The Fledgling Conflicts Of Interest At The Nouveau Rating Agencies





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.

 
Tyler Durden's picture

The Fledgling Conflicts Of Interest At The Nouveau Rating Agencies





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).

 
Tyler Durden's picture

CT Attorney General: "It's Time To Shatter The Old Boys Club Of Rating Agencies"





For the few sane people who have been watching and recoiling with horror as Bernanke, Geithner and Bair implement their insidious "rich get richer" PPIP/TALF plan by relying exclusively on the AAA ratings of the very same rating agencies that were the primary cause of the current economic catastrophe (yes Steve Liesman, not the CDS market or CDS traders - the rating agencies) today was a glorious day.

 
Tyler Durden's picture

CT Attorney General: "It's Time To Shatter The Old Boys Club Of Rating Agencies"





For the few sane people who have been watching and recoiling with horror as Bernanke, Geithner and Bair implement their insidious "rich get richer" PPIP/TALF plan by relying exclusively on the AAA ratings of the very same rating agencies that were the primary cause of the current economic catastrophe (yes Steve Liesman, not the CDS market or CDS traders - the rating agencies) today was a glorious day.

 
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