Friday, November 28, 2008

The subprime mortgage mess

A scandalous detail about the failings of the ratings agency in the mortgage mess as revealed in a column by Tom Friedman in the NYTimes: Standard & Poor's was not equiped to estimate what would happen to default rates if home prices went down. Their system was built on the assumption that home prices could only go up.

Apparently, they had never heard the term housing bubble.

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