Electricity is the kind of power we love when it’s working and hate when we’re having problems with it. Understanding some basics about electricity and homes can help you, whether you’re checking out a home to buy or getting ready to put your home on the market.
Excerpted from:
Understanding Your Electrical System Can Help You Spot Problem Areas
Depending on the location, whether you’re shopping for a new home or trying to sell your current residence, one of the biggest challenges is trying to reduce street noise.
Love The House, Hate The Traffic Noise — There Is Hope!
Like he did for the relationship between mortgage brokers and appraisers, the three major bond-rating firms reached an agreement with Cuomo, the New York Attorney General that creates more independence for ratings agencies. Cuomo has been one of the only public official currently in office that hasn’t simply tried to slap more regulations on all parties, pointing the finger and saying don’t do bad things.
Give me a break.
Like him or not, Cuomo has done is to fix systemic flaws within the financial system by following the mortgage.
Rating agencies were one of the weakest links in the integrity of the lending system.
Today’s WSJ article Bond-Rating Fee Overhaul Looms in Settlement, discusses the potential agreement.
many critics claim has been a chronic problem with bond ratings: They are paid for by the entities being rated. That financial dependence has been blamed for the industry’s failure to predict that risky subprime mortgages would crumble, resulting in losses and shaken confidence.
If the firm gave too low a rating, it wouldn’t get hired by the investment bank who would simply go to the next agency to get the rating they needed:
Under the Cuomo settlement, which would cover the hardest-hit portions of the mortgage market, the firms would get paid for their review, even if they didn’t end up getting hired to rate the deal. This would mean the firms would get paid even if they were tough. The plan, which requires final agreement by Mr. Cuomo’s office and the rating firms, wouldn’t dictate the exact fees rating firms could charge. But the firms would be required to charge more than a nominal fee for their preliminary work.
It still doesn’t fully separate the rating agencies for preferential treatment from bond issuers but it sure is a good start.
Cuomo seems to be less abrasive that Spitzer, his predecessor was. At the very least, the bond agencies were guilty of gross negligence for using the wrong data to understand the potential default rates for the securitization of subprime, alt-a and for that matter prime loans. Last summer they suddenly downgraded highly rated mortgage bonds claiming the models they had didn’t work.
Cuomo seems to be more interested in fixing investor confidence than playing hard ball with the agencies. It’s refreshing to think there is a light at the end of the securitization tunnel.
Speaking of stirring things up, take a look at these videos of the recent Parkersburg Iowa tornados: [bank security camera] [house] (hat tip to Market Power)
Read more here:
[Cuomo Recipe] Ratings Agencies Take Hand Out Of Cookie Jar
There is an absolutely spot-on article in the New York Magazine called Triple-A Failure: The Ratings Game
I highly recommend that everyone read the article from start to finish.
In 1996, Thomas Friedman, the New York Times columnist, remarked on “The NewsHour With Jim Lehrer” that there were two superpowers in the world — the United States and Moody’s bond-rating service
Essentially in their quest for profits, the agencies’ relationship with Wall Street changed from a mysterious and powerful ratings entity to a firm working closely with their clients.
Rating agencies (Moody’s, S&P, Fitch are the biggies) sought fees from investment banks to rate securities. If the ratings were too conservative, the bank could simply go to one of the other agencies to get the rating they wanted to. The agencies were essentially behind the curve in understanding the sophisticated new products being introduced at a rapid rate.
A few years ago, as I was getting more and more frustrated at the lack of neutrality in the mortgage lending process and the shaft given to good appraisers in the form of pressure, even an outsider like me could see that something was wrong with the relationship. The system can’t allow a ratings agency to be at the mercy of fee driven investment banks. The proverbial hand in the cookie jar.
Rating agencies were the enabler of securitization much like appraisers were the enabler of shady lending practices. Search hard enough and long enough and anyone can find someone to make the deal work.
By providing the mortgage industry with an entree to Wall Street, the agencies also transformed what had been among the sleepiest corners of finance. No longer did mortgage banks have to wait 10 or 20 or 30 years to get their money back from homeowners. Now they sold their loans into securitized pools and — their capital thus replenished — wrote new loans at a much quicker pace.
Mortgage volume surged; in 2006, it topped $2.5 trillion. Also, many more mortgages were issued to risky subprime borrowers. Almost all of those subprime loans ended up in securitized pools; indeed, the reason banks were willing to issue so many risky loans is that they could fob them off on Wall Street.
The search for new profits and their close relationship with Wall Street placed them in a non-neutral position yet investors were relying on the ratings.
Thus the agencies became the de facto watchdog over the mortgage industry. In a practical sense, it was Moody’s and Standard & Poor’s that set the credit standards that determined which loans Wall Street could repackage and, ultimately, which borrowers would qualify. Effectively, they did the job that was expected of banks and government regulators. And today, they are a central culprit in the mortgage bust, in which the total loss has been projected at $250 billion and possibly much more.
The agencies have a very big credibility problem right now with investors. It’s all about the lack of activity in the credit markets right now.
It’s certainly telling that the three ratings agencies and four major mortgage related associations took the position with Congress that the current administration’s suggestions for fixing the problem were flawed. The Real Estate Roundtable, Mortgage Bankers Association, Commercial Mortgage Securities Association and the National Association of Realtors basically took the position not to do anything but teach investors how to, well…invest.
Are they kidding?
The credit markets are currently frozen because of the lack of neutrality in the rating and mortgage process, not because investors are ignorant. Next thing we will start hearing is that the agencies and associations will simply self-police.
Fear of change, living in denial.
Over rated.
Here’s something that’s not overrated: Joe’s Gizzard City, my favorite college hangout (note the Michigan State jersey).
Here is the original post:
[AAA] Ratings Agencies And The New Culture Of Partnership
