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Credit Rating Agencies And The Subprime Crisis
Credit rating agencies (CRAs)—firms which rate debt instruments/securities according to the debtor's ability to pay lenders back—played a significant role at various stages in the American subprime mortgage crisis of 2007–2008 that led to the great recession of 2008–2009. The new, complex securities of "structured finance" used to finance subprime mortgages could not have been sold without ratings by the "Big Three" rating agencies—Moody's Investors Service, Standard & Poor's, and Fitch Ratings. A large section of the debt securities market—many money markets and pension funds—were restricted in their bylaws to holding only the safest securities—i.e. securities the rating agencies designated "triple-A". The pools of debt the agencies gave their highest ratings to included over three trillion dollars of loans to homebuyers with bad credit and undocumented incomes through 2007. Hundreds of billions of dollars' worth of these triple-A securities were downgraded to "j ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credit Rating Agency
A credit rating agency (CRA, also called a ratings service) is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of default. An agency may rate the creditworthiness of issuers of debt obligations, of debt instruments, and in some cases, of the servicers of the underlying debt, but not of individual consumers. Other forms of a rating agency include environmental, social and corporate governance (ESG) rating agencies and the Chinese Social Credit System. The debt instruments rated by CRAs include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, and collateralized securities, such as mortgage-backed securities and collateralized debt obligations. The issuers of the obligations or securities may be companies, special purpose entities, state or local governments, non-profit organizations, or sovereign nations. A credit rating facilitates the trading ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities, which may be described as bonds, pass-through securities, or collateralized debt obligations (CDOs). Investors are repaid from the principal and interest cash flows collected from the underlying debt and redistributed through the capital structure of the new financing. Securities backed by mortgage receivables are called mortgage-backed securities (MBS), while those backed by other types of receivables are asset-backed securities (ABS). The granularity of pools of securitized assets can mitigate the credit risk of individual borrowers. Unlike general corporate debt, the credit quality of securitized debt is non-stationary due to changes in volatility that are time- ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Joe Nocera
Joseph Nocera (born May 6, 1952) is an American business journalist, and author. He has written for The New York Times since April 2005, writing for the Op-Ed page from 2011 to 2015. He was also an opinion columnist for Bloomberg Opinion. Early life and education Nocera was born in Providence, Rhode Island. He earned a B.S. in journalism from Boston University in 1974. Career In the late 1970s he was an editor at ''The Washington Monthly''. In the 1980s, he was an editor at ''Newsweek''; an executive editor of '' New England Monthly''; and a senior editor at ''Texas Monthly''. Nocera was the "Profit Motive" columnist at ''Esquire'' from 1988 to 1990 and wrote the same column for '' GQ'' from 1990 to 1995. He worked at '' Fortune'' from 1995 to 2005, in a variety of positions, finally as editorial director. He became a business columnist for ''The New York Times'' in April 2005. In March 2011, Nocera became a regular opinion columnist for ''The Timess Op-Ed page, writing on Tu ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Inside The Doomsday Machine
Inside may refer to: * Insider, a member of any group of people of limited number and generally restricted access Film * ''Inside'' (1996 film), an American television film directed by Arthur Penn and starring Eric Stoltz * ''Inside'' (2002 film), a Canadian prison drama film * ''Inside'' (2006 film), an American thriller film starring Nicholas D'Agosto and Leighton Meester * ''Inside'' (2007 film), originally ''À l'intérieur'', a French horror film directed by Alexandre Bustillo and Julien Maury ** ''Inside'' (2016 film), a 2016 Spanish-American film remake of the 2007 film * ''Inside'' (2011 film), an American social film * ''Inside'' (2012 film), an American horror film * ''Inside'' (2013 film), a Turkish drama film * '' Bo Burnham: Inside'', a 2021 American comedy special * ''Inside'' (2023 film), an upcoming film starring Willem Dafoe Television * "Inside" (''American Horror Story''), an episode of the tenth season of ''American Horror Story'' Music Albums * ' ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Basel II
Basel II is the second of the Basel Accords, which are recommendations on banking laws and regulations issued by the Basel Committee on Banking Supervision. It is now extended and partially superseded by Basel III. The Basel II Accord was published in June 2004. It was a new framework for international banking standards, superseding the Basel I framework, to determine the minimum capital that banks should hold to guard against the financial and operational risks. The regulations aimed to ensure that the more significant the risk a bank is exposed to, the greater the amount of capital the bank needs to hold to safeguard its solvency and overall economic stability. Basel II attempted to accomplish this by establishing risk and capital management requirements to ensure that a bank has adequate capital for the risk the bank exposes itself to through its lending, investment and trading activities. One focus was to maintain sufficient consistency of regulations so to limit competi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Tranche
In structured finance, a tranche is one of a number of related securities offered as part of the same transaction. In the financial sense of the word, each bond is a different slice of the deal's risk. Transaction documentation (see indenture) usually defines the tranches as different "classes" of notes, each identified by letter (e.g., the Class A, Class B, Class C securities) with different bond credit ratings. The term ''tranche'' is used in fields of finance other than structured finance (such as in straight lending, where ''multi-tranche loans'' are commonplace), but the term's use in structured finance may be singled out as particularly important. Use of "tranche" as a verb is limited almost exclusively to this field. The word '' tranche'' means ''a division or portion of a pool or whole'' and is derived from the French for 'slice', 'section', 'series', or 'portion', and is also a cognate of the English 'trench' ('ditch'). How tranching works All the tranches togeth ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Government-sponsored Enterprise
A government-sponsored enterprise (GSE) is a type of financial services corporation created by the United States Congress. Their intended function is to enhance the flow of credit to targeted sectors of the economy, to make those segments of the capital market more efficient and transparent, and to reduce the risk to investors and other suppliers of capital. The desired effect of the GSEs is to enhance the availability and reduce the cost of credit to the targeted borrowing sectors primarily by reducing the risk of capital losses to investors: agriculture, home finance and education. Well known GSEs are the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, or Freddie Mac. Congress created the first GSE in 1916 with the creation of the Farm Credit System. It initiated GSEs in the home finance segment of the economy with the creation of the Federal Home Loan Banks in 1932; and it targeted education when it chartered Sa ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Freddie Mac
The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.Tysons Corner CDP, Virginia ". . Retrieved on May 7, 2009. The FHLMC was created in 1970 to expand the secondary market for mortgages in the US. Along with the Federal National Mortgage ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Fannie Mae
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the New Deal, the corporation's purpose is to expand the secondary mortgage market by securitizing mortgage loans in the form of mortgage-backed securities (MBS), allowing lenders to reinvest their assets into more lending and in effect increasing the number of lenders in the mortgage market by reducing the reliance on locally based savings and loan associations (or "thrifts"). Its brother organization is the Federal Home Loan Mortgage Corporation (FHLMC), better known as Freddie Mac. In 2022, Fannie Mae was ranked number 33 on the ''Fortune'' 500 rankings of the largest United States corporations by total revenue. __TOC__ History Background and early decades Historically, most housing loans in the early 1900s in the United States w ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Synthetic CDO
A synthetic CDO (collateralized debt obligation) is a variation of a CDO that generally uses credit default swaps and other derivatives to obtain its investment goals.Lemke, Lins and Picard, ''Mortgage-Backed Securities'', §5:16 (Thomson West, 2017-2018 ed.). As such, it is a complex derivative financial security sometimes described as a bet on the performance of other mortgage (or other) products, rather than a real mortgage security. The value and payment stream of a synthetic CDO is derived not from cash assets, like mortgages or credit card payments – as in the case of a regular or "cash" CDO—but from premiums paying for credit default swap "insurance" on the possibility of default of some defined set of "reference" securities—based on cash assets. The insurance-buying "counterparties" may own the "reference" securities and be managing the risk of their default, or may be speculators who've calculated that the securities will default. Synthetics thrived for a brief time ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
CDO-Squared
CDO-Squared is a collateralized debt obligations backed primarily by the tranches issued by other CDOs. These instruments became popular before the financial crisis of 2007–08. There were 36 CDO-Squared deals made in 2005, 48 in 2006 and 41 in 2007. Merrill Lynch was a big producer, creating and selling 11 of them. The collapse of the market for collateralized debt obligations and CDO-Squared contributed to the 2008 subprime mortgage crisis The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. It was triggered by a large decline in US home prices after the coll .... Goldman Sachs appears to be the last bank to hold CDOs-Squared, holding $50 million in June 2018. 2004 *Abacus 2004-2 *Abacus 2004-3 *ACA 2004-1 *Cascade Funding I *Crystal Cove *Davis Square Funding III *Dunhill *E-Trade III *Glacier Funding I *Glacier Funding II *Independence V *Jupiter H ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
