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The Ongoing Credit Crunch: What's Next for Structured Finance, Credit Rating Agencies, and Bond Insurers?

February 13, 2008 – Comments (2)

The Ongoing Credit Crunch: What's Next for Structured Finance, Credit Rating Agencies, and Bond Insurers?  

I attended this panel yesterday. It was broadcast live on CNBC, I heard (poor viewers) but for credit-market-crash-gawkers like me, it was very informative.

Personally, I thought Jim Chanos had the simplest, best ideas for helping avoid a crash in the value of some of these structured finance products -- change the rules that force sales of this stuff when it's not rated AAA. That would a) reduce the incentive for the ratings agencies to fudge on them and b) keep fire sales from forcing everyone to sell 80-cent dollars for 60 cents.

Joseph Mason, however, delivered the most focused, entertaining, incisive, and historically-grounded presentation, dealing with the history of bank bailouts and how they can (sometimes) be done right, but almost never are. (Short version: we loan to banks that will continue to fail, and when we recapitalize them, we let the money slip out the back door as dividends...)

I uploaded an MP3 of the entire discussion to this spot: http://hyperfileshare.com/d/2d78d910 

Here's the official description of what went on.

Download Ed Grebeck's presentation here

Download William Ackman's presentation here

Download Joseph Mason's presentation here

The subprime mortgage crisis is now generating problems for highly-rated bond insurers, with potential costs to U.S. municipalities and other bond issuers.  This panel discussed the future roles of structured finance, the credit rating agencies, and bond insurers, in the mortgage markets and the financial system.  What should regulators and legislators do, if anything?   

Panelists: James Chanos: Managing Partner, Kynikos Associates, L.P.

William Ackman: Managing Member, Pershing Square Capital Management, L.P.

Sean Egan: Founding Principal, Egan-Jones Ratings Co.

Ed Grebeck: CEO, Tempus Advisors

Joseph Mason: Professor, Drexel University    

Moderator:    John C. Weicher, Director, Center for Housing and Financial Markets, Hudson Institute   http://www.hudson.org/index.cfm?fuseaction=hudson_upcoming_events&id=503