Gawker 
Enter your username and password.
New York, 6:20 AM
Mon Dec 7
15 posts in the last 24 hours
Tip Your Editors:
Tipline: 646-214-8138
Editor-in-Chief:
Gabriel Snyder |
West Coast Editor:
Richard Rushfield |
Contributing Editors:
Valleywag:
Ryan Tate |
Media:
Hamilton Nolan |
Politics:
Alex Pareene |
Investigations:
John Cook |
Entertainment:
Brian Moylan |
Nights:
Adrian Chen |
Azaria Jagger |
Ravi Somaiya |
Weekends:
Foster Kamer |
Video Editor:
Richard Blakeley |
Original material is licensed under a Creative Commons License permitting non-commercial sharing with attribution.
11/18/09
The problem with the rating agencies is that they were being asked to be the gatekeepers/quasi-regulators in a scheme of private securitization where everyone's incentives are skewed. The whole promise that an unregulated private label securitization could be more efficient and better managed than if it were regulated is the key here. You can replace the rating agencies all day, but unless you start aligning incentives at the origination, securitization, and marketing levels, you'd still have this problem.
The reason the GOP is blaming the rating agencies and Fannie Mae/Freddie Mac for the crisis is because if you buy into their silly narrative (as the author of this post clearly has), you can maybe pretend that this whole crisis isn't in fact a massive indictment of their ideological worldview that unregulated markets can produce optimal outcomes. Because if you don't believe that, then you basically have no reason to ever vote Republican again, other than because you hate minority groups.
11/17/09
11/17/09
That should be the title of the history of the crisis #aig
11/17/09
Suuuuure they did. Like Robin Williams holding himself hostage. #aig
11/17/09
11/17/09
[www.econ.puc-rio.br]
AIG was either going to be a ward of the state - AAA - or not - D. That was probably the one thing that ratings agencies did right in late 2008! Regulators were oscillating between a bailout and failure. Consequently, asset ratings oscillated from high to low. What the fuck do you expect anyone to rate a company laden with junk debt absent government backing, John? They were either worthless or bulletproof - such is the magic of being hooked up to the printing press.
It makes perfect sense for credit rating agencies to say AIG's balance sheet was full of sudden junk. Remember, until 5 minutes ago the underlying assets hedged by AIG's CDS positions had been rated AAA (which is what the S&P employees, which you quoted out of context, were talking about - a CDO, not a CDS). If the risk of default for a hedged asset is AAA, why wouldn't the default hedge be? #aig
11/17/09
Based upon the continued job losses, tight credit, foreclosures, and bankruptices, with an official unemployment rate of 10% (and 17% when factoring in underemployed), it is not at all apparent that letting AIG or banks fail would have been worse than what we have now.
And what we have now, based on an outsider's perspective, are banks giving million dollar bonuses while people are going hungry, losing their homes and jobs, and not able to take care of their children.
It's immoral. The bailout was immoral as well. It hasn't helped on the jobs front at all, except for those bankers who needed their bonuses. #aig
11/17/09
Yes, taxpayers were blackmailed. They were not, however, blackmailed by ratings agencies. I'm disputing the analysis in the post, not the legitimacy of popular outrage surrounding the financial industry.
And hate to break it to you, but as bad as jobs are now they'd have been worse without massive financial stimulus. Our economy, at the low end, is a phantasm created by massively risky debt arrangements. Welcome to post-America. #aig
11/17/09
11/17/09
Actually, it was in a way, just it was to exising companies that can't function without substantial debt. Which is to say "every corporation in America." #aig
11/17/09
11/17/09
11/17/09
The AIG bailout took place well after that was common knowledge.
AIG's ratings were intrinsically tied to CDS ratings - insurance against the default of CDO's - not CDO ratings, those pyramids of mortgage debt. The crucial error that ratings agencies made was to fail to acknowledge the default risk inherent in CDO's.
Geithner's choice was for AIG to face a claims crisis that would send it to bankruptcy (which would have threatened the viability of many street banks as they took massive losses on CDS hedges) or bail it out. Ratings agencies would simply have to mark the result as D or AAA - absent the bailout there wasn't a solvent company left to rate. And they certainly weren't behind Geithner's inexplicable decision to allow the taxpayer to be a counterparty at no discount. That is and remains a wholly unjustifiable action unilaterally decided upon by an overmatched regulator. #aig
11/17/09
Congratulations on your post-hoc risk-taking bent. Tattoos and a Harley Davidson for you, sir. Krugman would call you a "liquidationist" and brand you with a fleur-de-lis. #aig
11/17/09
11/18/09
10/27/09
4060 Cents on the Dollar, Then Geithner Stepped In10/27/09
4060 Cents on the Dollar, Then Geithner Stepped In10/27/09
4060 Cents on the Dollar, Then Geithner Stepped In10/27/09
4060 Cents on the Dollar, Then Geithner Stepped InIf Goldman were losing money like every other bank, would we like them better? #goldmansachs
10/27/09
"If Goldman were losing money like every other bank, would we like them better?" I’d hope not, but you have a point. I think the problem is not that GS is minting money this year, it’s the fact that it is proposing astronomical bonuses this year. Lloyd B could have been a bit more sensitive to how this would be perceived. It’s not written in stone that compensation has to be 50% of revenues. It would have been more prudent to add $10 billion to reserves to cushion the blow should another 2008 happen. Believe me, everyone at GS would still be more than adequately compensated. #goldmansachs
10/28/09
10/28/09
I also agree with you that GS benefitted from Lehman's collapse, and the subsequent capital raising efforts of other financial institutions. Did I say they didn't? I just said they were minting money (w/o saying what was helping) and had no need to pay 50% of their windfall revenues to employees.
Please re-read my comment. I don't think we disagree. #goldmansachs
10/27/09
4060 Cents on the Dollar, Then Geithner Stepped In10/27/09
4060 Cents on the Dollar, Then Geithner Stepped InThat means they wanted to pay 60 cents on the dollar. #goldmansachs
10/27/09
10/27/09
4060 Cents on the Dollar, Then Geithner Stepped In10/27/09
4060 Cents on the Dollar, Then Geithner Stepped In08/07/09