Worthless as Tulips

Former executives from S&P and Moody's told lawmakers today that "in order to maximize profits...

originators of structured securities "typically chose the agency with the lowest standards, engendering a race to the bottom in terms of rating quality
".

Top executives of the credit-rating companies said in testimony that they were unprepared for the sharp drop in home prices and that their models and systems failed.

"Events have demonstrated that the historical data we used and the assumptions we made significantly underestimated the severity of what has actually occurred."

"We did not foresee the magnitude or velocity of the decline in the U.S. housing market,

nor the dramatic shift in borrower behavior brought on by the changing practices in the market
."

"Nor did we appreciate the extent of shoddy mortgage origination practices and fraud." between 2005 and 2007.

Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities...

made it appear they were incompetent or "sold our soul to the devil for revenue. Let's hope we are all wealthy and retired by the time this house of cards falters."

The Nattering One muses... What does this mean? It questions the "value" of EVERYTHING in the stock, bond and derivatives markets.

In other words, much like the price of Tulips from 1634-1637; or the South Sea Company stock 1719-1722; or internet stocks 1995-2002...

that stock or bond or CDO your holding could be as just worthless as the house you overpaid for in the mania.

Hattip to Bloomberg.

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