• 22 Jul 2009 at 10:20 AM

S&P Does Its Part For TALF

By Greg Michaels

We are now inside of the two minute warning on the rating agency credibility countdown clock. While even the most green shoot loving politicians and pundits warn that there is a world of hurt coming in the commercial real estate market, S&P took the opportunity to upgrade 7 series of highly coveted 2007 vintage CMBS to AAA after downgrading them a week earlier. It seems S&P took a step back and rethought its approach to the scenario loss assumptions that brought it worldwide praise from investors and governments alike and realized that it was far too harsh. Consequently, the rating agency handed out the frequently seen 9-notch upgrade from BBB- to AAA to three series yesterday and made them (and the four other series) TALF eligible. Mad Max, take notice, the three series that got the supersized upgrade were from your favorite firm.

Comments (22)

  1. 1
    Posted by guest | July 22, 2009 at 10:28 AM

    greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg greg
    GREG!

  2. 2
    Posted by guest | July 22, 2009 at 10:33 AM

    Greg = tits on a bull

  3. 3
    Posted by guest | July 22, 2009 at 10:38 AM

    9 times out of 10 it’s an electric razor, but every once in a while it’s a dildo.

  4. 4
    Posted by guest | July 22, 2009 at 10:44 AM

    Greg points out a rather ridiculous 9 notch upgrade by a ratings agency and has some dry humor in it. I think his target isn’t the DB commentariat, but the other readers who appreciate wry humor and don’t post very much. What’s particularly wrong with this post @ 1-2? People who hate on GM are just jealous he gets to work with Bess and they don’t.
    -some schmuck who isn’t Greg or his mom, but who thinks the Greg hating is tired out

  5. 5
    Posted by guest | July 22, 2009 at 10:46 AM

    i find this amazing – earlier today Moody’s/REAL Commercial Property Price Index announced prices in May09 (the most recent available) had fallen 7.6%, on the back of a 8.6% fall in April. down 25.8% over 12 months and down 34.8% from the peak (Oct07). What sort of credit support protects these tranches in the face of such price movements?

  6. 6
    Posted by guest | July 22, 2009 at 10:51 AM

    @4
    I do agree with your first sentence (a very rare product for greg). The rest of what you wrote … well i guess that is what boyfriends are for … so keep on defending

  7. 7
    Posted by guest | July 22, 2009 at 10:53 AM

    @4 STFU, any day is a good day to hate Greg and…
    recycled garbage which has been covered better in lots of other places:
    http://www.nakedcapitalism.com/2009/07/s-shoots-self-and-investors-in-foot.html

  8. 8
    Posted by guest | July 22, 2009 at 10:56 AM

    @ 5 – It’s not about price, it’s about performance of those tranches. If the payments are still being made, and with the assumption they will continue, then the price movements in the underlying asset technically doesn’t affect the performance. However, if the underlying assets do take a nosedive in prices then the performance may deteriorate as a result of the parties responsible for the payments deciding to walk away.

  9. 9
    Posted by Anal_yst | July 22, 2009 at 10:59 AM

    @8
    Agreed, but increased delinquency rates, decreased yield, blah blah ad nauseum do have an effect, and while I’m not familiar with each deal or tranche, I doubt they have the credit enhancement to hold onto AAA ratings through so many tranches.

  10. 10
    Posted by guest | July 22, 2009 at 11:01 AM

    Greggums,
    I am out of dental damns and anal desensitizing lube. Mind stopping by Duane Reed on your way home? Oh, and don’t forget we are having fish sticks for dinner. I know they are your favorite.
    Love,
    Mom

  11. 11
    Posted by Anal_yst | July 22, 2009 at 11:01 AM

    Also, I should add, I love that DB now has banner ads suggesting we go to school to be Hair Stylists, awesome

  12. 12
    Posted by guest | July 22, 2009 at 11:02 AM

    @8
    Depends on how they bought it too though. that price depreciation will hurt the tranche holders if they wanted out of their investment anytime soon, or if the coupon on their tranche is low, since loans won’t be able to refi. Tranche holders won’t be able to sell because potential buyers know that if something happens to the businesses paying, the recovery will be very slow in coming and also be much much lower than par.

  13. 13
    Posted by guest | July 22, 2009 at 11:08 AM

    @ 9, 11 – @8 here, I agree with you and am not justifying the upgrade because I seriously doubt fundamentals improved overnight (which they didn’t).
    The only thing I can see as justification is that by upgrading them to be eligible for TALF, that the TALF support in itself then makes it eligible for those ratings. Then again, if these are 2007 vintage then that was just below the peak so the future performance will most likely end up deteriorating, it’s now a matter of who takes the hit (gov’t).

  14. 14
    Posted by guest | July 22, 2009 at 11:12 AM

    Another day and more great news for GS. What a f**kin joke. I’m on the Mad Max train. Nice article for the tinfoil hats:
    http://www.thedailybeast.com/blogs-and-stories/2009-07-21/goldmans-crisis-control/?cid=hp:beastoriginalsL2. And no reform of ratings agencies. It’s all coming together perfectly!

  15. 15
    Posted by guest | July 22, 2009 at 11:38 AM

    GREG:
    When are you moving to the new accounting blog they just lines up? May be you should put in for that job. They generate an average of 1.5 comments per article so I hope these brutes will stop abusing you there. Some days I really wish you’d get your teaching certificate and be done with this web thing once and for all.
    Remember to stop by the pharmacy on the way home! And, I forgot, it’s fish sticks with waffle-cut fries for dinner, dessert will be warm apple pie with two scoops of vanilla ice cream on top. May be I will even let you have some root beer if those vulgar animals are too rough on your back side today.
    Love you, always,
    Mom

  16. 16
    Posted by guest | July 22, 2009 at 11:54 AM

    CPAnus!!!

  17. 17
    Posted by guest | July 22, 2009 at 12:42 PM

    Dear Greg’s Mom,
    I’m sorry, it’s not you, it’s me. I know I encouraged you when I said that I thought you were funny.
    I know that made you try harder to make me happy and it’s my fault.
    I think we just need a break. I need to figure things out on my own, you know? It’s not you, but I think you should probably move all your stuff out of here until I can get my head right. I care for you but I need some space and so do you.
    No, really I will call or text you or something next week, ok?
    -Dealbreaker

  18. 18
    Posted by guest | July 22, 2009 at 1:17 PM

    …this is getting uncomfortably ridiculous. The entire paper and mortgage markets are based on these “agencies’” opinion and they appear to have absolutely no clue…let’s get away with these oligopolistic, high operating marginistic, have absolutely no cluelistic institutions already!

  19. 19
    Posted by guest | July 22, 2009 at 1:33 PM

    The upgrades were to frontpay classes with basically a 0% probability of taking a loss. S&P embarassed itself by douwngrading these in the first place and has now exacerbated that by admitting that they fucked up and had no understanding of structure.

  20. 20
    Posted by guest | July 22, 2009 at 1:42 PM

    S&P is completely useless and worthless.

  21. 21
    Posted by guest | July 22, 2009 at 2:54 PM

    S&P retains its first amendment right to yell “Come on in, the water is safe!” on a shark infested beach. That’s what’s going on here.

  22. 22
    Posted by finflaneur | July 23, 2009 at 12:53 PM

    More on this: http://beta.thedailyblank.com/2009/07/sp-cant-locate-head-firmly-up-ass-quick-hit/

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