Tag: rating agencies

Weekend wrap-up: 1/16 to 1/20/12

| January 21, 2012 | 0 Comments

Here’s what you may have missed this past week on the Finance Addict. And, of course, the GIF of the Week after the jump. ‘Cause you deserve it.

  1. Have banks been robosigning credit cards, too? Robosigning has created a mortgage nightmare, are credit cards next?
  2. The ECB is very p.o.’d. The big news out of Europe recently was *not* S&P’s downgrade of 9 countries, including France, but rather something else.
  3. Will high oil prices bring the economy low again? It’s always the unintended consequences that get you in the end. Will this be true for global oil prices?
  4. Has banks’ bonus culture really changed? Short answer is, “No.”
  5. Models behaving badly. Why are the financial models that so many banks and investors depend on so open to manipulation? Continue Reading

Models behaving badly

| January 20, 2012 | 1 Comment

By Photo-Fenix on Flickr

So it’s not just American banks playing fast, loose and fraudulent with figures. There’s a new ProPublica article out that raises serious questions about Deutsche Bank, picking up on a theme that was first reported on by Zero Hedge and by Dealbook, (who dropped it like it was hot), back in 2009.

The article highlights a junior Deutsche Bank analyst who was allegedly told to change the numbers in the financial models used to estimate how much cash would be generated by the mortgage-backed bonds that DB packaging up as CDOs. Ajit Jain was supposedly asked by mid-level management to pretty up the figures so that rating agencies would assign the CDOs a coveted AAA rating, which would allow Deutsche to sell them to a much broader base of investors. Continue Reading

Weekend wrap-up: 1/9 to 1/13/12

| January 15, 2012 | 0 Comments

Here were the most popular posts from this week. Check ‘em out, plus our GIF of the week after the jump!

  1. So what’s the dumb money doing right now?  Newsflash: there’s no investment fairy flying from asset manager to asset manager sprinkling higher ABS yields on the undeserving.
  2. Truth and “truthiness” in TARP. The latest TARP report looks at the lifetime costs to U.S. taxpayers and also showcases the Treasury’s naughty side.
  3. How we went from CDO to CD “No!” There’s a new study out that attempts to understand why so many collateralized debt obligations (CDOs) failed so spectacularly.
  4. Is it time for Uncle Ben to raise the roof? Is it time to prepare ourselves for a return to a less accommodating interest rate environment?
  5. The SEC does it again. Is there any government body having a harder time of it these days than the SEC?

Continue Reading

So what’s the dumb money doing right now?

| January 11, 2012 | 1 Comment

By Katcha on Flickr

My eyes started to bleed when they fell upon the following Bloomberg piece:

Sales of bonds backed by everything from timeshare rentals to shipping containers to entertainment royalties are poised to rise this year as investors seek to boost returns with interest rates at about record lows.

So-called esoteric asset-backed securities issuance may soar 12.9 percent to $35 billion, compared with debt linked to more traditional collateral such as auto and credit-card loans, which will grow 8.75 percent to $87 billion, according to a forecast from Credit Suisse Group AG.

Barclays Capital, Citigroup Inc. and Wells Fargo & Co. are directing investors toward the debt[...].

“The ability to pick up incremental yield while not taking additional risk makes esoteric ABS attractive,” [Cory] Wishengrad, [Barclays Capital] co- head of securitized products origination, said in a telephone interview. Continue Reading

How we went from CDO to CD “No!”

| January 11, 2012 | 0 Comments

The rabbit does some magic

There’s a new (preliminary) study out by Oliver Faltin-Traeger of Blackrock and Christopher Mayer of Columbia Business School that attempts to explain a key mystery of the financial crisis: why did so many collateralized debt obligations (CDOs) fail so spectacularly? Especially when many of them enjoyed AAA credit ratings from the Big 3 rating agencies?

Remember: it was  AIG’s exposure to CDOs (through the naked credit insurance it sold to Goldman Sachs and others) that caused its epic fail and compelled the U.S. to nationalize what used to be the world’s largest insurance company. (And as I mentioned yesterday we are three years down the road and U.S. taxpayers are still waiting to get their $51.1 billion dollars back.)

We now know that CDOs were kind of like a Febreze for putrid mortgages. Continue Reading