4 ms·

Isn't it the job of Credit Rating Agencies to give poor ratings to these packages if the loans in them are bad?

cm2187 8y ago
What makes you think they don’t? Rating agencies have been burned by the last crisis and are poised not to make the same mistakes.
- icebraining 8y ago
  Is there a /s I'm missing? What evidence is there that they are doing anything differently, and what incentive would they have to do so?
  - cm2187 8y ago
    What evidence do you have? I work with the teams who structure these transactions and get them rated on the bank side. Their methodologies have been revised, every communication with the originating bank is recorded and actively monitored (they have a compliance officer on every call), they do not allow feedback or revising their initial rating to optimise the structure. They have become paranoid. What makes you think they are not? And their incentive is the same as an audit company, it is an existential threat.
    - saiya-jin 8y ago
      I don't think you understand how trust works. Rating agencies have failed so many times, with bad consequences mainly for common folks instead of higher management (I mean long prison terms for whole C-suite/senior mgmt + all personal assets lost) that they need to bring some seriously good performance, over long time (say at least 2 economy cycles) to gain back at least some portion of trust. Sharp suites and clever talk only won't impress anyone anymore.
    - icebraining 8y ago
      > What evidence do you have? The business model is the same; big failures are still common (e.g. the recent case of Oi SA); the same Big Three still control the market; "no meaningful reform of the credit-rating agencies has been undertaken" (Paul Volcker). > And their incentive is the same as an audit company, it is an existential threat. What existential threat? Which relevant (and this mostly means the Big Three, which "issued 97%–98% of all credit ratings in the United States and roughly 95% worldwide") rating agency has went bankrupt or even faced a major threat to its dominance?

What makes you think they don’t? Rating agencies have been burned by the last crisis and are poised not to make the same mistakes.

icebraining 8y ago
Is there a /s I'm missing? What evidence is there that they are doing anything differently, and what incentive would they have to do so?
- cm2187 8y ago
  What evidence do you have? I work with the teams who structure these transactions and get them rated on the bank side. Their methodologies have been revised, every communication with the originating bank is recorded and actively monitored (they have a compliance officer on every call), they do not allow feedback or revising their initial rating to optimise the structure. They have become paranoid. What makes you think they are not? And their incentive is the same as an audit company, it is an existential threat.
  - saiya-jin 8y ago
    I don't think you understand how trust works. Rating agencies have failed so many times, with bad consequences mainly for common folks instead of higher management (I mean long prison terms for whole C-suite/senior mgmt + all personal assets lost) that they need to bring some seriously good performance, over long time (say at least 2 economy cycles) to gain back at least some portion of trust. Sharp suites and clever talk only won't impress anyone anymore.
  - icebraining 8y ago
    > What evidence do you have? The business model is the same; big failures are still common (e.g. the recent case of Oi SA); the same Big Three still control the market; "no meaningful reform of the credit-rating agencies has been undertaken" (Paul Volcker). > And their incentive is the same as an audit company, it is an existential threat. What existential threat? Which relevant (and this mostly means the Big Three, which "issued 97%–98% of all credit ratings in the United States and roughly 95% worldwide") rating agency has went bankrupt or even faced a major threat to its dominance?