Monday, August 17, 2009

S&P, About Face

"A surprise ratings flip-flop by Standard & Poor's cast a cloud of uncertainty over the $700 billion market for commercial mortgage-backed securities and further tarnished the ratings firm's credibility. ... The imbroglio began in May when S&P warned it might downgrade billions of dollars of triple-A rated CMBS bonds because of proposed changes in its ratings methodology. ... A week ago, S&P followed up on its warning and cut the creditworthiness on 19 classses of a $7.6 billion deal that is viewed by market participants as a benchmark for pricing CMBS bonds. Some of the classes were downgraded all the way from triple-A to just one notch above 'junk.' But on Tuesday S&P did an about-face. The New York-based ratings company said in a statement that it restored some of those bonds to triple-A because of its 'recently updated criteria' for assessing losses on top-ranked CMBS bonds. ... The $7.6 billion benchmark deal at the center of the ratings controversy is commonly known as GG10. It was sold by RBS Greenwich Capital and Goldman Sachs Group Inc. in 2007", Lingling Wei and Anusha Shrivaastava at the WSJ, 23 July 2009, link:

It's good to see S&P knows who is its boss. What new information came to S&P's attention to cause it to change its rating? Well S&P?


Jr Deputy Accountant said...

Maybe now that the Fed has extended its ingenious TALF scam, the Fed wants to make sure it is getting its money worth.

Who cares when investor dollars are at stake? S&P only has to behave when it is Fed money on the line.


p.s. I use the term "money" loosely, of course.

Anonymous said...

I think you should of titled this post "Fed Voodoo #327".

ZimBen must rationalize all this as necessary for full employment otherwise you might think he would get tired of catering to the bondholders... but maybe he looks at Greenspan's consulting contract with Deutsche Bank and imagines he wants one too after stepping down... maybe SocGen or Calyon?

The toothless wonders at the SEC might want to take a looky-see at this case... but they are probably applying the new BAC standard >>> "Take all orders from the Fed and Treasury"... march on loyal regulators... whitewash is the order of the day.