Feature: A Matter of Opinion ($)

Investment Dealers' Digest Magazine - September 10, 2007
by Yael Bizouati

Other factors came into play in the rating agencies' role in the subprime crisis, according to Janet Tavakoli, founder and president of Tavakoli Structured Finance, a Chicago-based consulting firm. Tavakoli believes there are flaws to the rating agency business model because they charge money upfront with no ongoing surveillance, and lack detailed knowledge of structured finance.

In a comment letter she wrote to the Securities and Exchange Commission in February, Tavakoli said that the robustness of securitization ratings from an investor's point of view is "unreliable across asset classes and at times even across deals. Furthermore, ratings of synthetic securitizations employing leverage are nearly meaningless due to the fact that the primary risks are market risks influenced by supply and demand forces, and credit ratings are wholly insufficient to evaluate that risk."


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