Crisis of Credit Visualized

[Pauly]

interesting watch and gained more insight on my behalf...


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Pauly

[disneyjoe7]

Interesting :) I like it.

[KrazyMofo24]

Great video, very informative.

[shack]

That is a simplistic and basic with all of the foundations...kinda like the Cliff notes. There is much more to it...but it gives you an idea.

[sucks2beme]

What pisses me off is that AAA rated stuff was really junk.
Someone figured out they were using software to evaluate
them. They then found ways to fool it. junk=AAA.
The whole rating system was rendered worthless.

[carpenter]

What pisses me off is that AAA rated stuff was really junk.
Someone figured out they were using software to evaluate
them. They then found ways to fool it. junk=AAA.
The whole rating system was rendered worthless.

Let me tell you something about the rating "system" ..

1) Who are the rating firms?
private sector firms.

2) How do they make money?
Investment firms (mostly from wall street) hire them to rate their assets (basically any security they want to push, be it a CDO, or any other investment).

3) So ... if they are overly "pessimistic" when they rate instruments, business might suffer?
yes.

4) why?
because there is more then one rating firm, and the investment bank's income depends on getting good ratings for what they try to unload, so they'll prefer to work with a more "optimistic" company.

5) Is there no regulation for the rating firms?
the government is supposed to do it.

6) Did it?
yes. every time they spotted a flying pig in the Washington DC sky.

7) Cynicism aside for a moment, how is it even possible to regulate this? when there are so many securities being rated?
Well.. do you pay taxes? good for ya! me too! do you cheat on your taxes? I hope you don't. because if you do, you might get audited and find yourself knee deep in it when you do. now ... here's a concept: once in a while, without special notice, some gov't employee visits the rating firm's offices and audits their work. if he sees that a package of two billion$ of "self-certified" loans, is rated as well as the German government (just an example) then .. well you get the point.
It is an innovative concept: "To hold the same standard for rating firms and tax payers" but it just might work. I mean if you face prison for 50K, others should face prison for 500Mil.