Given the steadily deteriorating state of our bank balance sheets, how can anyone be confident that a conduit with voluntary bank support (I understand that some but not all conduits have fully guaranteed support) will be supported when push comes to shove.

I don’t see how a worse case scenario situation can work out without some of the smaller funds breaking the buck — unless the regulators decide that money funds will get government support. Basically I trust the regulators to be too serious about their jobs to cave in to Wall Street to that degree — though I may definitely be wrong about that.

By the way, this was not some big name firm that I could be sure would have the money to bail out it’s money market fund if necessary.

Greenlight Capital, Einhorn’s firm, was the largest shareholder in New Century Mortgage just before its demise. Einhorn had a seat on the company’s board. He accumulated a large portion of shares in 2006, when subprime delinquencies had already started their spike.

One wonders if Einhorn blames the ratings agencies for his mistakes.

Nevertheless, it was a well-written, thoughtful speech.

I just had to kick and scream with my parent’s account manager who had casually placed the proceeds of the sale of their house in a “perfectly safe” money market account that right now is full of ABCP and 6% SIVs.

I, of course, was being completely unreasonable, since the fund only invests in AAA paper!

New issuance investors get the same indenture, models (nobody buys without intex files), and structuring docs that the agencies get, along with most anything else they ask for. Bankers don’t have the luxury to ignore requests for additional information from note buyers, and this has always been the case. Einhorn’s comment may hold water for investors in the secondary markets, long after close.

Again, mom & pops cannot directly invest in structured products, and institutional investors have a duty to do their homework for their investors. That’s why they get paid the big bucks.

Just because you’re legally allowed to smoke doesn’t mean that you should. People shouldn’t shed tears for big boys who lose money on their bets. They sure didn’t complain when they made great returns during the boom years.

So rating agencies are not different from tout sheets at the race track?

Take MBS paper and wrap it with a CDO, and guess what? Overall, it gets a higher credit rating!

That was a big reason to pump out all those CDOs—the issuers make more money with a higher credit rating.

And this rigged structure of different credit rating standards for different products played right into the hands of the credit rating agencies—as it was undoubtedly intended by them.

For they make FAR higher profit margin on rating CDOs than all the other plain-vanilla products.

Everyone must read that commentary. It was very educational.