As it turns out, our robot overlords are destroying human civilization.
Moody's awarded incorrect triple-A ratings to billions of dollars worth of a type of complex debt product due to a bug in its computer models, a Financial Times investigation has discovered.
Internal Moody's documents seen by the FT show that some senior staff within the credit agency knew early in 2007 that products rated the previous year had received top-notch triple A ratings and that, after a computer coding error was corrected, their ratings should have been up to four notches lower.
Simple question: If a computer bug is Moody's excuse, why did these things get triple A ratings from Standard & Poor's also?
CPDOs expose ratings flaw at Moody's[Financial Times]
Posted by guest , May 21, 2008 4:47PM
Didn't ya know, AAA is contagious.
Posted by guest , May 21, 2008 5:36PM
Look - like I've said a thousand times before. Traders don't make mistakes. The models were wrong. This just proves my point.
Posted by guest , May 21, 2008 5:59PM
The reason is simple, the rating agencies are worthless. If those folks had the brain power they would be trading for a living.
Fitch, S&P & Moody's are the Junior Varisty of the finance world. Where tier 3 C students go to feel important.
Posted by guest , May 21, 2008 7:11PM
@5:36 I agree totalty. The quants are to blame. They don't know finance, just the numbers. In hindsight, we should have known.
The Other Guy From Delaware
Posted by Rating_Analyst , May 21, 2008 9:31PM
If rating agency people are so worthless then why do most of them end up at banks after a couple of years?
Posted by guest , May 21, 2008 10:53PM
@5:59 It seems like Fitch was actually smart enough to avoid this mess. I agree on the other two. And remember, all the bulge brackets (except Goldman) are bush league too for losing billions by relying on these models.
Posted by onetwo , May 22, 2008 12:50AM
Has a AAA actually defaulted yet?
Posted by guest , May 22, 2008 5:08AM
Rating_Analyst - if true (and I've not personally seen it) it's probably because they've learnt something. ie - as soon as they're competent, they move to a bank. Leaving which people at rating agencies? Yep - the incompetent. QED
Posted by guest , May 22, 2008 5:57AM
It was not fitch smartness, they just had no business going... that's why they have no gotten involved
Posted by guest , May 22, 2008 5:57AM
It was not fitch smartness, they just had no business going... that's why they have no gotten involved
Posted by guest , May 22, 2008 5:57AM
It was not fitch smartness, they just had no business going... that's why they have no gotten involved
Posted by guest , May 22, 2008 6:46AM
"Has a AAA defulated yet?" Yes several. Including mezz senior tranches that seen 0% recovery on abs cdo liquidation.
Posted by guest , May 22, 2008 7:50AM
Wow, I posted this article in yesterday's Opening Bell, and it took you until the close to repost just a link to the article with no added insight or commentary?
There must have been a ton of other really substantive posts yesterday you were working on in the meanwhile.
Posted by Rating_Analyst , May 22, 2008 8:16AM
People often work at agencies over banks for job security and easier hours. It isn't always about money for some people (hard to believe, I know.)
Of course all those people got screwed on Tuesday when S&P fired them...
Posted by guest , May 22, 2008 8:42AM
Well, no job is bulletproof. But the fundamental analysts still have a pretty sweetheart deal over there for those who like to work 40 hour weeks.