causal

Triple-A Rating Was Gamed In Securitization

Unlike a corporation (e.g. Hewlett Packard) whose ability to adjust bond risk is third-order, issuers of securitized products in 2006-2007 had both the incentive and fine-grained control to engineer Triple-A ratings, so deals clustered right at the rating margin and carried more risk than equivalently rated corporate bonds.

causalpending

Speaker

Paul Pfleiderer

Evidence Quote

you have control over the risk and what gets rated Triple A. So of course what we had was everyone just getting right over the margin.

Source

Paul Pfleiderer on the Misuse of Economic ModelsEconTalk
Created: 6/13/2026, 12:27:00 AM

My Notes

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