tag:blogger.com,1999:blog-7905515.post1232639840319342240..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: How to Make BBB Securities AAAEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7905515.post-88204257979224043162010-04-29T01:06:45.922-05:002010-04-29T01:06:45.922-05:00I almost gagged when the Goldman guy evaded the qu...I almost gagged when the Goldman guy evaded the question about whether he had ever heard of "barbelling" collateral in an RMBS. That's the oldest trick in the book. Underwriters like Goldman are experts at knowing exactly how to exploit the weaknesses of rating agency methodologies and mix as much crap as possible into a deal without causing adverse changes in subordination levels.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-45899658030239788122010-04-28T06:27:17.141-05:002010-04-28T06:27:17.141-05:00Dave, that is right ... but relies on the folks do...Dave, that is right ... but relies on the folks doing the ratings understanding what they rate. S&P and Moody's are experienced rating the default risk in corporate bonds. But rating a bundle of consumer loans? That was new to them.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-23379121193367002010-04-28T00:19:35.510-05:002010-04-28T00:19:35.510-05:00So the problem wasn't with the idea of convert...So the problem wasn't with the idea of converting some percentage of BBB bonds into AAA CDO tranches <i>per se</i> but with the equity tranche being way too small, because presumably, the BBB bonds never should have been considered BBB to begin with. But, theoretically, you could still make AAA-rated CDO tranches out of junk securities if your equity tranche was high enough (40%+, maybe?).DaveinHackensackhttps://www.blogger.com/profile/01313169814904229272noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-77730571603082116882010-04-27T18:29:51.168-05:002010-04-27T18:29:51.168-05:00If Sparks tried to fully explain it to the Senator...If Sparks tried to fully explain it to the Senators their collective heads would have exploded. <br /><br />What bothers me about all these hearings is that the bankers look weak. Sure verbally slapping around the senators may mean the industry has to move to Singapore, but ultimately I think it would be worth it.Anonymousnoreply@blogger.com