Comments on: Defective Moody’s Program Issues Billions of Erroneous Aaas

By: Moody’s Wrong – S&P Right? | Jameson

Moody’s Wrong – S&P Right? | Jameson — Tue, 01 Sep 2009 20:39:20 +0000

[...] further adjustments to our assumptions and rating opinions if we think that is appropriate.” (via naked capitalism – 21 May [...]

By: Anonymous

Anonymous — Thu, 12 Jun 2008 22:27:00 +0000

Have you ever written a line of code in your life?? Just a simple dot in a c++ code is enough to give you a syntax error, but a logic error (lets say in a loop) can give you the wrong results without anyone realising that there was a mistake. If an error like this exist in a monte carlo program lets say, then it is enough to cause problems without anyone realising it.

By: Michael Blomquist

Michael Blomquist — Thu, 22 May 2008 16:22:00 +0000

We are looking for expert witnesses in a case against debt rating agencies, investment banks and lenders.

Anonymous stated they would have some great stories for the SEC.

Anonymous and others please send email to:

michaelsblomquist@gmail.com

By: Ginger Yellow

Ginger Yellow — Thu, 22 May 2008 08:52:00 +0000

unsympathetic – there is no underlying collateral as such in a CPDO. They’re effectively leveraged bets on spread movements in indices of credit default swaps.

By: Unsympathetic

Unsympathetic — Wed, 21 May 2008 18:47:00 +0000

Don’t forget that S&P’s model is based on historical default rates rather than actual analysis of underlying collateral. Remember, the whole “basis” for this was.. drop the standards for AAA so that we can sell more of it and get more exec options! So, instead of rating the loans at what they should be, they’re selling D- loans at AAA basis point rates.

Moody’s should not be lambasted alone for this shlock.

S&P’s model is fatally flawed as well, and deserves equal time being roasted on the spit.

By: Max

Max — Wed, 21 May 2008 16:30:00 +0000

Ahh, the old agent-principal problem.

By: Anonymous

Anonymous — Wed, 21 May 2008 15:41:00 +0000

I am young and have only spent a bit over 1 year in the financial workforce. Yet I learnt quickly the ethics when dealing with mistakes in large international companies.

The last statement from Moody’s is particularly striking. At my place of work it was unwritten policy to cover up our mistakes and even maintain incorrect analysis to avoid losing face with our clients. Totally contrary to the legal and regulatory requirements we faced. I would have some great stories for the SEC.

By: Ginger Yellow

Ginger Yellow — Wed, 21 May 2008 13:39:00 +0000

It’s also worth noting that Moodys’ official statement is a classic non-denial denial.

By: Ginger Yellow

Ginger Yellow — Wed, 21 May 2008 13:27:00 +0000

I don’t think it’s a a questionof designing a model to conform with S&P – both agencies were rating the first transactions at the same time. I think conformity with S&P led them to ignore the error which led to that conformity, and then they panicked when they found it. The real sin, if the FT is right, was in failing to disclose the error and tweaking the methodology to maintain the rating once the error was found. A lot depends on how accurate the FT is in its reading of the internal documents – was this methodology change independent of the error or triggered and informed by its discovery? Were the changes it made justified (at the time) as improvements, or were they fudges? So far, it looks very bad.