Well, well, well. What we've always suspected is now publicly documented. Insiders get one set of books, the public gets the other "official" set. Ah, the joys of having our country turned into a casino.
Moody's AMBAC MBIA Junk
Here's the latest headline:
Moody's Implied Ratings Lab Reveals Ambac, MBIA Turning to Junk
May 30 (Bloomberg) -- Moody's Investors Service has created a new unit that surprises even its own director.
The team from Moody's Analytics, which operates separately from Moody's ratings division, uses credit-default swap prices as an alternative system of grading debt. These so-called implied ratings often differ significantly from Moody's official grades.
The implied ratings frequently show that swap traders think debt is in more danger of defaulting than Moody's credit ratings signify. And here's the kicker: The swaps traders are usually right.
The credit quality of bond insurers, which have been at the center of the subprime storm, differ dramatically. The official ratings of these companies say the insurers are in great shape; the alternative ratings say they're in dire danger of defaulting on their debts.Simply take a look below at the Top 10 Major Holders of each player: Moody's, AMBAC and MBIA. Then notice that Goldman Sachs is a Major Holder, not only in both AMBAC and MBIA, but also in both rating agencies, Moody's and Standard & Poors. Do you think they used the "official version?"
Finally, take a look at the Major Holders of the largest investment banks
and the major money center banks. See the pattern? One cozy little financial club.
Perhaps this is why: Sometimes The Dragon Wins
NOTE: McGraw-Hill owns these companies and these:
- BusinessWeek Magazine
- Standard & Poors Ratings Service
- Standard & Poors Financial Information