Ms. Tavakoli was far ahead of the financial
industry in pointing out the problems with the rating of
structured
financial
products, lax underwriting standards, and excessive leverage--noting
underwriters are responsible for performing due diligence
appropriate
to the circumstances and must disclose material information.
Ms. Tavakoli also warned of problems with credit ratings
in her book: Collateralized Debt Obligations & Structured
Finance (John Wiley & Sons, 2003) and in several
subsequent articles. Earlier, she addressed specific credit
rating and language issues in her book: Credit Derivatives & Synthetic
Structures (John Wiley & Sons 1999, 2001).
After Ms. Tavakoli gave this speech, conditions deteriorated
even more,
especially
with
respect
to subprime
backed paper,
and Ms. Tavakoli wrote
many articles following this topic very closely. Ms. Tavakoli's
was the first letter the SEC posted in February 2007, in
which
she said the NRSRO designation for the rating agencies
should be revoked for structured products. She
gave examples of misrated products
including
the
fact that
CPDOs did not merit a “Triple-A” rating.
At
the end of this short segment from a speech in April 2005
speech to the International
Monetary
Fund,
Ms.
Tavakoli
discusses structured credit ratings and how "Triple-A" paper
often traded as if it were lower rated, and structured credit
products, even "Triple-A" rated products, are often
very illiquid. She also notes that "Triple-A" paper
is often misrated.
Other discussion included the importance of rewriting credit
default swap language provided by dealers.
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.
