Rating Agencies: Measuring the Measurers
The Economist (print edition) - May 31, 2007 New York
By Matthew Valencia

"Add to that the weaknesses of the models. Janet Tavakoli, a consultant, believes that standards have slipped as business has boomed. In subprime lending, she says, the models misread the level of correlation between different types of assets–a crucial variable–and ignored signs that risks were greater than historical data suggested. Securitised assets using this flawed methodology were used as collateral in other deals, compounding the error.

It would take the entry of a Bloomberg or a Thomson-Reuters to stir up real competition, but neither is thought to be preparing an assault. So for the moment the incumbents' dominance is likely to remain, as Ms Tavakoli says, a “gift that just keeps giving.”


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Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct professor of derivatives at the University of Chicago's Graduate School of Business. She is the author of: Credit Derivatives & Synthetic Structures (John Wiley & Sons, 1998, 2001), Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, 2008).

Janet Tavakoli's book on the global financial meltdown is Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street (Wiley 2009).

Clients of Tavakoli Structured Finance have the benefit of proprietary consultation, which is not available in any other paid or public forum. Clients also commission proprietary research and analysis.

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