I am at a loss as to which allusion better characterizes rating agency behavior: ostriches, as per the headline, or monkeys, as in “See no evil, hear no evil, speak no evil.” But in each case, I think I am being unfair to the animals.
I happened to miss skip past an article in Friday’s Financial Times, “Rating Agencies Under Scrutiny,” on the incorrect assumption that it covered familiar ground. While much of it did indeed recap old news, it had an eyeopener:
One revelation that analysts have described as “extraordinary” this week is that S&P has no specific estimate of how much turmoil in the housing market would be needed to force downgrades of the AAA and AA ratings that have been left untouched in this round of downgrades and constitute the bulk of the principal value of most mortgage-backed deals. Moody’s also said in an interview that it had no such estimate.