Moody's Finds Religion: Too Little Too Late
It was announced that Moody's is weighing a new 21-point scale for rating structured finance securities. The firm is also considering adding a warning label that acknowledges the ratings' limitations. While I welcome any reforms that can prevent another subprime collapse, this to me falls into the too-little-too-late category.
Furthermore, the market for securitized financial instruments has all but dried up, so it's unclear to me what benefit the new system will have. In reading the news, I couldn't help but recall the asbestos litigation and subsequent regulation which required certain buildings to contain the phrase. CAUTION: ASBESTOS. HAZARDOUS. DO NOT DISTURB WITHOUT PROPER TRAINING AND EQUIPMENT.
My suggestion for the ratings agencies: "CAUTION: PURCHASING THIS SECURITY COULD GREATLY REDUCE YOUR PORTFOLIO."
Furthermore, the market for securitized financial instruments has all but dried up, so it's unclear to me what benefit the new system will have. In reading the news, I couldn't help but recall the asbestos litigation and subsequent regulation which required certain buildings to contain the phrase. CAUTION: ASBESTOS. HAZARDOUS. DO NOT DISTURB WITHOUT PROPER TRAINING AND EQUIPMENT.
My suggestion for the ratings agencies: "CAUTION: PURCHASING THIS SECURITY COULD GREATLY REDUCE YOUR PORTFOLIO."
Labels: Moody's, subprime mortgages
0 Comments:
Post a Comment
<< Home