Poor and Moody - PowerPoint PPT Presentation

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Poor and Moody

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  1. Poor and Moody The Credit Rating Agencies and the Subprime Mess

  2. The CRA: Mystical • “The rating agencies are somewhat of a mystically anointed monopoly, not unlike our good friends Fannie and Freddie, but with even less accountability.”(Baker 2005) Mark Carl Rom

  3. The CRA: Omniscient • “Everyone assumed the credit agencies knew what they were doing.” (Mason 2008) Mark Carl Rom

  4. The CRA: Powerful Mark Carl Rom “You could almost say that we live again in a two-superpower world. There is the U.S. and there is Moody's. The U.S. can destroy a country by leveling it with bombs; Moody's can destroy a country by downgrading its bonds.” (Friedman 1995)

  5. US Mortgage Markets Mark Carl Rom

  6. Two Main Questions • What was the role of the CRA in the subprime mess? • What should be done? Mark Carl Rom

  7. Today • The basics • The mess • The mistakes • The reforms Mark Carl Rom

  8. What do the CRA do? Mark Carl Rom

  9. How do the CRA do it? Mark Carl Rom

  10. The CRA and the Mortgage Markets Mark Carl Rom

  11. The Mess Mark Carl Rom

  12. The Mess Mark Carl Rom

  13. The Mistakes, I $ Mark Carl Rom

  14. Incentives Mark Carl Rom

  15. The Mistakes, II ? Mark Carl Rom

  16. Ignorance Mark Carl Rom

  17. The Mistakes, III Mark Carl Rom

  18. Stress Mark Carl Rom

  19. Stress Mark Carl Rom

  20. The Remedies • Incentives • Manage, not eliminate • Ignorance • Clarify, not prevent • Stress • Report…but moot Mark Carl Rom