June 5, 2010
Stamping out AAA ratings?
It's been three years since the securitized debt plane began its crashing descent. Crash investigations continue with the hope that findings will prevent future failures. Last week the Fiscal Crisis Inquiry Commission, chaired by Phil Angelides focused on the credit rating agencies.
Rating agencies may not have been the root cause of our financial crash, but Angelides points out they did play a fundamental role in accelerating the securitization and therefore the origination of products that were highly deficient... such a low teaser rates, negative amortization and an epidemic of mortgage fraud. Warren Buffet points out the entire American public was caught up in the belief that housing prices could not fall dramatically, what he calls a mass-delusion.
If there's a lesson to be learned it's don't believe everything you read on a label, take a good look inside the package.
Phil Angelides to Moody's "did you ever feel like Lucy on the assembly line?" Great video of the hearing if you have a few hours to spare... http://www.c-spanvideo.org/program/293839-2
Posted by Eric Von Berg