Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Stock Market Seasonal Trend Analysis - 23rd Oct 19
Gold Prices Stand to Rally on Brexit Delay - 23rd Oct 19
US Stock Markets “Roll Over” On Earnings and Economic Data At Channel Highs - 23rd Oct 19
Yes, Gold “Just Sits There” and That’s Quite a Feat - 23rd Oct 19
Downsizing – What to Watch Out For - 23rd Oct 19
Gold Price Has Not Corrected Enough - 23rd Oct 19
U-Turn or Perfect Storm? Globalization at Crossroads - 22nd Oct 19
Stock Market Indexes Struggle and TRAN suggests a possible top - 22nd Oct 19
Fake Numbers Fueling the Wage War on Wealth - 22nd Oct 19
A Look at Peak Debt - 22nd Oct 19
The Coming Great Global Debt Reset - 22nd Oct 19
GamStop Became Mandatory - 22nd Oct 19
Learn to Spot Reliable Trading Setups: ANY Market, Any Market Time Frame - 21st Oct 19
How To Secure A Debt Consolidation Loan Even If You Have A Bad Credit Rating - 21st Oct 19
Kids Teepee Tent Fun from Amazon by Lavievert Review - 15% Discount! - 21st Oct 19
Stock Market Stalls: Caution Ahead - 21st Oct 19
Stock Market Crash Setup? - 21st Oct 19
More Stock Market Congestion (Distribution) - 21st Oct 19
Revisiting “Black Monday Stock Market Crash October 19 1987 - 21st Oct 19
Land Rover Discovery Sports Out of Warranty Top Money Saving Tips - 21st Oct 19
Investing lessons from the 1987 Stock Market Crash From Who Beat it - 20th Oct 19
Trade Wars: Facts And Fallacies - 20th Oct 19
The Gold Stocks Correction and What Lays Ahead - 19th Oct 19
Gold during Global Monetary Ease - 19th Oct 19
US Treasury Bonds Pause Near Resistance Before The Next Rally - 18th Oct 19
The Biggest Housing Boom in US History Has Just Begun - 18th Oct 19
British Pound Brexit Chaos GBP Trend Forecast - 18th Oct 19
Stocks Don’t Care About Trump Impeachment - 17th Oct 19
Currencies Show A Shift to Safety And Maturity – What Does It Mean? - 17th Oct 19
Stock Market Future Projected Cycles - 17th Oct 19
Weekly SPX & Gold Price Cycle Report - 17th Oct 19
What Makes United Markets Capital Different From Other Online Brokers? - 17th Oct 19
Stock Market Dow Long-term Trend Analysis - 16th Oct 19
This Is Not a Money Printing Press - 16th Oct 19
Online Casino Operator LeoVegas is Optimistic about the Future - 16th Oct 19
Stock Market Dow Elliott Wave Analysis Forecast - Video - 16th Oct 19
$100 Silver Has Come And Gone - 16th Oct 19
Stock Market Roll Over Risk to New highs in S&P 500 - 16th Oct 19
10 Best Trading Schools and Courses for Students - 16th Oct 19
Dow Stock Market Short-term Trend Analysis - 15th Oct 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast Oct - Dec 2019 by Nadeem Walayat

Fixing FUBAR: Next Week in Washington D.C.

Stock-Markets / Market Regulation Nov 30, 2010 - 12:07 PM GMT

By: Janet_Tavakoli

Stock-Markets

Next week, the Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, hosts its Supervision Summit. Attendees comprise 300 "stakeholders," whom I'll address the morning of Wednesday, December 8, 2010 with a presentation titled: Repairing the Damage of "Fraud as a Business Model."


Among other things I'll remind them that wide-spread foreclosure problems have festered for years. In January 2008, I submitted the manuscript for my book, Structured Finance, to my publisher. I explained that the rating agencies should be stripped of their NRSRO designation for structured products. Among a host of other problems, the rating agencies were clueless as to how to account for failures in the way the assets were handled in the creation of the deals they rated:

Executives at Standard & Poor's, Moody's and Fitch said they were waiting until foreclosure sales before recognizing losses, but they did not comment on the rising number of vacant homes on which foreclosures had not occurred, the complaints of trustees who could not foreclose because they could not "find" the required documentation to prove they had the right to foreclose or on the possibility of non-economic mortgage restructuring which would simply delay foreclosure. They also did not comment on the rising delinquencies which most often led to inevitable foreclosure.

NRSRO stands for "Nationally Recognized Statistical Rating Organization." Moody's, Standard and Poor's, and Fitch were the key rating agencies participating in rating collateralized debt obligations, yet they failed to follow basic statistical principles. When the SEC solicited comments for its proposed rules for the Credit Rating Agencies, mine was the first letter it posted on its web site in February 2007. I recommended the SEC revoke the NRSRO designation for the rating agencies with respect to rating structured finance transactions.

By the end of 2007 and through 2008, rating agencies scrambled to keep up. Moody's kept changing its models and "correlation" assumptions. At one point it announced that "new correlation" would equal three times "old correlation." In December 2007, Standard and Poor's announced an increase in capital requirements in order for certain financial guarantors to maintain "triple-A" ratings only to materially increase its loss assumptions in January of 2008. Fitch announced it might issue one notch downgrades for Ambac and MBIA [the two largest municipal bond insurers] in December 2007, only to downgrade Ambac two notches in January 2008 when Ambac announced larger than expected losses in its credit derivatives portfolio. The rating agencies were inconsistent, ill-informed, and floundering.

Structured Finance & Collateralized Debt Obligations, (excerpt from Chapter 17) Wiley, 2008.

MBIA eventually slid from "AAA" to a junk rating. Ambac filed for Chapter 11 bankruptcy protection November 8, 2010.

Of course, I will also give my recommendations on how to fix the rating agencies. The least controversial part of my presentation will be on the rating agencies, but it is worth mentioning this small preview in advance. None of the issues I'll talk about next week is new, and "financial reform" is late to the party and dead on arrival.

By Janet Tavakoli

web site: www.tavakolistructuredfinance.com

Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct associate professor of derivatives at the University of Chicago's Graduate School of Business. Author of: Credit Derivatives & Synthetic Structures (1998, 2001), Collateralized Debt Obligations & Structured Finance (2003), Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, September 2008). Tavakoli’s book on the causes of the global financial meltdown and how to fix it is: Dear Mr. Buffett: What an Investor Learns 1,269 Miles from Wall Street (Wiley, 2009).

© 2010 Copyright Janet Tavakoli- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules