Wednesday, December 19, 2007

Who Needs the Rating Agencies?-3

"Moody's Investors Service ... said ... it is affirming its highest rating, triple-A on bonds insurer MBIA. ... Moody's ... also affirmed the top rating of insurer Ambac. ... Bill Ackman [BA] of New York hedge fund Pershing Square Capital Management LLC, described the moves by Moody's are 'creeping incrementalism'. ... As with MBIA, Moody's also affirmed the ratings of CIFG Guaranty, while changing the rating outlook to 'negative'," WSJ, 17 December.

"Fitch Ratings said it will set a ceiling for credit ratings on certain complex, and difficult-to-trade investments like debt that helps fund ... [SIVs]. Under the new proposed framework, ratings would be capped at single-A for assets that are opaque and not easily traded. ... Fitch also said that constant proportion debt obligations, or CPDOs, aren't likely to garner ratings above triple-B", WSJ, 19 December.

BA has long been a critic of the monolines. I agree with him. Fitch's new ratings limits are more than overdue. I have no problem with Moody's "tripe-A" ratings on MBIA, Ambac and CIFG.


Tom Stone said...

Do you still think MBIA deserves a triple A rating? Fitch seem to disagree if placing 173,022 bond issues on credit watch negative means anything.AMBAC also seems to have a lot of exposure compared to assets,why do you think their AAA rating is appropriate given their risk exposure?

Independent Accountant said...

You didn't read my remark carefully. I wrote TRIPE not triple A. I never thought the monolines deserved triple A ratings. I have a lengthy post coming on the monolines on Tuesday or Wednesday that will more fully explain my position.