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How Rating Firms' Calls Fueled Subprime Mess
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How ratings firms gave A grade ratings to mortgage pools of securities where the borrowers had ridiculously easy down payments or made no payments at all financing the down payment with a second loan. And despite gathering evidence about the shakiness of these securities continued to give these ratings till late 2006. Did the large portion of Moody's earnings and othe ratings agencies earnings come from such shaky deals that wiggled out higher ratings so that the securities could be marketed globally and held in the portfolios all around the world Even in the portfolios of otherwise conservative institutions as pension funds? What a mess. See Henry Kaufman in today's WSJ on the greed motives or a better sounding word aggressive risktaking that make such crises likely in the future, even as globalized trading and the internet spread these mistakes faster around the globe.
2008 subprime mortgage securities financial crisis
08/05/2007
Financial crisis from the widespread distribution of securities created from pools of subprime mortgages in the portfolios of finacil institutions around the globe. How credit rating agencies helped create the crisis by giving A ratings to these securities which were then widely distributed as credit worthy.
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