CDO Boom Masks Subprime Losses, Abetted by S&P, Moody's, Fitch

LINKS:
http://www.bloomberg.com/apps/news?pid=20601010&sid=ajs7BqG4_X8I&refer=news
http://www.bloomberg.com/apps/news?pid=20601109&sid=aTlvTOj5XpTE&refer=exclusive

Highlights:

• Investment-grade ratings: "On 95 percent of the securities in the CDO gave no hint of what was in the debt package -- or that it might collapse."
  

• Lehman Brothers Holdings Inc.: " CDO holdings have already declined in value between $18 billion and $25 billion because of falling repayment rates by subprime U.S. mortgage holders."
  

• "Scarlet Letter: "Regulators' plans to add a letter to credit ratings of asset-backed debt may constrict the $4.6 trillion market."

• CDO Failures: "The number of collateralized debt obligations failing since October has reached 186, with $202 billion of assets, data compiled by S&P and Bloomberg show. That's 40 times the total for the previous four years, according to the rating company."

Comments:

Two well written articles by a Bloomberg team of writers about the CDO market :

First: Gives you some historical information regarding how we got to this deteriorated state regarding CDO market.

Second: Discusses a possible course of action to begin solving a major problem. It is apparent that CDO's are going to be around for a while and the costs will continue to rise.

Jim