FOCUS Credit ratings face credibility gap, inquiries in wake of sub-prime woes

Congress is expressing concern that the rating agencies have an inherent conflict of interest clouds the objectivity of their ratings. Hearings and Congressional attacks on the rating agencies will be forthcoming. However, the likelihood of substantive Congressional legislative is less than the propect of new and tougher regulations by the SEC. These regulations may have a significant impact on the...

Moody's Ratings downgrades in the first week of September are serving to further tighten financial conditions in the Libor and CP markets which are increasing the downside risks to the economy.  

In the last Quarter , Moody's announced that they will be lowering the credit ratings on $5.2B of bonds backed by sub-prime loans.The company lowered the ratings of 399 loans made in 2006  and stated the possibility of downgrading 32 more made in the same year. According to S&P , 65% of the bonds in indices that track subprime mortgages do not meet certain standards.Overall the CDO market...

Congress is looking for the "villians" in the subprime mortgage meltdown, and the credit rating agencies are prime suspects.  S&P, Moody's and Fitch will have to play a defensive game, but in the end substantive legislation is unlikely.

*  Securities ratings estimate future value based on past performance of similar investments. * Risks associated with specific investments change over time. * Investment ratings aid pricing before purchase and afterward indicate portfolio quality.  * A failing portfolio could be filled with investments formerly know as AAA grade without violating any major law of nature. * Blaming...

For years now, the Mortgage and Commercial Lending arena has been the subject of great debate as to whether sound credit decisions were being made. Now, finally, the proof of careless lending practices are coming to light: the question at hand is how will we deal with the fallout?