MISSEDLINK

 

 

• "this report - described the events - and the system !"

 

 

 

 

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• "that propelled - the financial markets - toward crisis !"

 

 

 

 

 

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• "collapsing - mortgage-lending standards - and the mortgage - securitization !"

 

 

 

 

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• "pipeline - when mortgage borrowers - defaulted !"

 

 

 

 

 

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• "the financial markets - were in crisis !"

 

 

 

 

 

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• "over-the-counter - derivatives ! - ( enactment of legislation - in 2000 ! )"

 

 

 

 

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• "was a key turning point - in the march toward - the financial crisis !"

 

 

 

 

 

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• "the failures - of credit rating agencies - were important cogs !"

 

 

 

 

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• "in the wheel - of financial destruction !"

 

 

 

 

 

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• "from 2000 - to 2007 - Moody’s rated - 45,000 !"

 

 

 

 

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• "mortgage-related - securities - as triple-A !"

 

 

 

 

 

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• "the financial system - now is in - some respects !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

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• "better regulated - but much more - need to be done !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! - ( also to prevent - that !!!!!!!!!!!! )"

 

 

 

 

 

 

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• "when the FED - cut interest rates - early in the century - and mortgage !"

 

 

 

 

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• "rates fell - there were mortgage-lending instruments - and the financing !"

 

 

 

 

 

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• "techniques - that turned mortgages - into investments - called securities !"

 

 

 

 

 

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"bond salesmen - earned bonuses - packaging - and selling - new kinds !"

 

 

 

 

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"of loans - offered by new kinds - of lenders - into new kinds !"

 

 

 

 

 

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"of complex - investment products - with hidden risks !"

 

 

 

 

 

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"when subprime - and other risky mortgages - began to default !"

 

 

 

 

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"the market - for complex investment - securities !"

 

 

 

 

 

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"abruptly failed - and investors panicked !"

 

 

 

 

• "Paul Volcker - said "it must not be - a kind of a - free ride" !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

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• "investment bank - bundled loans - from a bank - or other lender !"

 

 

 

 

 

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• "into securities - and sold them - to investors !"

 

 

 

 

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• "by moving loans - off their books - the banks reduced - the amount of capital !"

 

 

 

 

 

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• "they were required - to hold as protection - against losses !"

 

 

 

 

 

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• "this complexity - transformed the credit rating agencies - into key players !"

 

 

 

 

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• "positioned between the - issuers - and the investors - of securities !"

 

 

 

 

 

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• "fees - desired ratings - derivatives were - financial contracts !"

 

 

 

 

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• "whose prices - are determined by - or "derived" - from the !"

 

 

 

 

 

• "value - of some underlying - asset - rate - index - or event !"

 

 

 

 

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• "speculating on changes - in prices - interest rates - and the like !"

 

 

 

 

 

 

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• "the derivatives markets - were organized as - exchanges !"

 

 

 

 

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• "or as - over-the-counter - markets - OTC !"

 

 

 

 

 

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• "the OTC market - was neither centralized - nor regulated !"

 

 

 

 

 

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• "Warren Buffett - said "he did not think - he could manage"  !"

 

 

 

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• "a complex - derivatives book ! - ( leverage in the system ! )"

 

 

 

 

 

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• "derivatives - were difficult - for market participants !"

 

 

 

 

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• "regulators - auditors - and investors - to understand !"

 

 

 

 

 

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• "derivatives - need to be - better regulated !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!"

 

 

 

 

 

 

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• "synthetic CDOs - were complex - paper transactions !"

 

 

 

 

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• "involving - credit default swaps - synthetic CDOs contained - no actual !"

 

 

 

 

 

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• "tranches - of mortgage-backed securities - or even tranches - of other CDOs !"

 

 

 

 

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• "instead - they simply referenced - these mortgage securities !"

 

 

 

 

 

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• "and thus were - bets - on whether - borrowers - would pay - their mortgages ?!"

 

 

 

 

 

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• "synthetic CDOs - would not have worked - without rating agencies !"

 

 

 

 

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• "to estimate - the probability - of default !"

 

 

 

 

 

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• "Moody’s - relied almost exclusively - on its own ratings !"