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Pingback on May 29th, 2009 at 8:08 pm
[...] are fighting swine Jump to Comments Citi v. S&P: Calculated Risk reports that Citigroup is livid that S&P would have the audacity to downgrade [...]
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May 28, 2009 at 11:08 pm
I think we should be pushing for an overhaul of the ratings system. Proper banking regulation will be very difficult with the current incentive structure.
May 29, 2009 at 12:20 am
James Kwak’s beautiful phrase “Some marriages truly last forever” BEAUTIFUL…. BEAUTIFUL……. BEAUTIFUL. Classic. I gotta find a way to get that entire posting in audio form, and replay it over and over and over. Robert Frost couldn’t write a stanza that touched my heart so deeply. By the way I’ve belonged to a credit union my entire life. Guys like Warren Spector and Alan D. Schwartz can eat my underwear. Mr. Kwak, what do you mean “feel good story of the DAY”???? Feel good story of the MONTH!!!!!!!!!!
May 29, 2009 at 12:39 am
I like the idea of banks and rating agencies arguing in public. Loud discussion does make it harder to hide things under the rug.
May 29, 2009 at 8:11 am
When the mediocrity of rating agencies was favoring the too big to fail banks, no one ever heard a peep from the banks. Now, when the same mediocrity isn’t playing nicely with the banks, the banks publically complain. Really good stuff! See http://www.bobgreenfest.wordpress.com for additional insights.
May 29, 2009 at 8:58 am
Even if the conflicts of interest posed by the rating agencies’ compensation model were removed, ratings would still make poor standards for use in regulations.
With even the most basic securities, there is still a tremendous amount of subjectivity involved in the ratings process and in deciding when to change a rating once conditions deteriorate. When financial innovations are introduced, the rating agencies can still legitimately fail to appreciate the risks involved on a grand scale. Anyone can.
May 29, 2009 at 9:46 am
Actually, I saw quite a few real feel good stories today. Japan’s exports rising, GDP shrinking less than expected, India’s GDP rising more than expected. Good Friday today.
May 29, 2009 at 10:58 am
How can there be “financial innovations” without appreciating first the risks involved?
What about a strict enforcing a strict deontology, everybody (bankers, raters) under oath, and stiff punishment if not? After all bankers, as it is, are in charge of creating everybody’s money… Such is the essence of the fractional reserve system lauded by Obama…
May 29, 2009 at 11:06 am
Sounds to me like this marriage is in the process of breaking up. Husband and wife are starting to blame each other now that the disfunctional but symbiotic relationship dynamics no longer work for their mutual benefit.
I for one hope this ends in a nasty divorce so that we can once again get independent rating agencies who look to get paid by the asset purchasers rather than the debt issuers.
May 29, 2009 at 12:20 pm
I like that a bank is feeling something other than smug about their worth and performance.
May 29, 2009 at 1:15 pm
I especially like that this could disqualify “assets” from PPIP! Yay!
May 29, 2009 at 3:09 pm
The CRAs are constitutionally privileged to make false statements. For first amendment purposes they are on par with the NYT and the rest of the press, like it or not (you read them right after the sports or style sections, right?). They can not be sued and certainly not punished no matter how wrong they get it. This shields them from all kinds of suits, not just defamation actions. At the risk of sounding like Greenspan, this market should be self-correcting. Investors should not be relying on their opinions any more, so issuers should have no need for their services.
May 29, 2009 at 5:28 pm
Bondgirl, which one of these Credit Rating Agencies do you work for??? (he asked, then guffawed)
May 29, 2009 at 9:28 pm
Is this a case of closing the barn door after all the horses have escaped?
May 31, 2009 at 10:52 am
I do not work for a rating agency and saying that ratings are subjective is hadly defending the rating agencies.
May 31, 2009 at 10:53 am
Um, hardly.