In investment, the bond credit rating assesses the credit worthiness of a corporation's debt issues. It is analogous to credit ratings for individuals and countries. The credit rating is a financial indicator to potential investors of debt securities such as bonds. These are assigned by credit rating agencies such as Standard & Poor's and have letter designations such as AAA, B, CC.
In the United States, there are seven rating agencies that have received the Nationally Recognized Statistical Rating Organization (NRSRO) designation, and are overseen by the SEC in their assignment of credit ratings: Standard & Poor's (S&P), Moody's, Fitch, A. M. Best, Japan Credit Rating Agency, Ltd., Ratings and Investment Information, Inc. and Dominion Bond Rating Service. S&P, Moody's, and Fitch are far larger than Japan CRA, R&I, A.M. Best and Dominion, and dominate the market with approximately 90-95 percent of world market share.
http://en.wikipedia.org/wiki/Bond_credit_ratingI have a couple of questions that I haven't heard anyone discussing.
* How were these sub-prime mortgages bundled into AAA securities?
* What liability do the credit rating agencies bear when these securities turn out to be much riskier than their rating seems to indicate?
* At what point do these ratings cross over into fraud?
* Are the agencies insured?
* If it is not AAA to A- securities that we'll be buying from the banks, that means the banks knew in advance that they were purchasing less than "safe" investments, and were willing to accept the added risk to gain a higher yield. That said, why bail them out? They gambled and lost.
I think we ought to set up a new FHA kind of agency, and fund it with the money that Wall Street wants. Anyone in foreclosure (or near it) who is unable to refinance under terms they can afford, could get a loan from this agency. This would:
*keep families in their homes
*protect home prices/values
*protect neighborhoods and communities
*earn a fair return for the taxpayers' investment
*enable congressmen to actually serve their constituents, rather than the New York banks
*prevent further abuses by the banks who caused this problem by not bailing them out of the results of their poor decisions
This should probably be accompanied by some sort of "moratorium" on foreclosures. Some people will need to be foreclosed, but at least this might get them a chance to start over with better terms.
At the banks and mortgage brokers - at least 1000 people should go to prison for fraud in the way these mortgages were marketed, both to the consumers and to the investment banks. These "masters of the universe" who pull down $300K or more by ripping people off need to learn that they're in deep sh*# for what they did. There's nothing like 48 months in prison to make someone realize that they farked up.
You simply cannot convince me that at least half of the $700billion in Paulson's plan won't be siphoned off by the very people who already profited by crashing the system. These guys rip off money for a living. They have wet dreams about stealing an amount like $700,000,000,000. They produce nothing. They add value to nothing. They simply take a little percentage of every transaction in the world, and then loan it back to us. And most of us let them. The idea of saving up to buy a big screen TV is almost un-thought of these days. There's nothing wrong with delayed gratification.
I don't like banks. I like cash. And I hate the idea of my cash going to a bank, especially after avoiding them for so long.
__________________