Updated: 11/27/09; 9:29:13 PM.
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Sunday, August 19, 2007

Mediaburn TV - WorldNews
Mediaburn TV - WorldNews



11:06:32 PM    

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Oligopoly Watch


Mortgage crisis and the rating oligopoly

Among the culprits in the mortgage crisis, the three credit rating giants deserve a good hare of the blame, according to a Wall Street Journal article ("How Rating Firms' Calls Fueled Subprime Mess" , 8/15/07). Not that the rating oligopoly is solely to blame, according to the WSJ article. "It was lenders that made the lenient loans, it was home buyers who sought out easy mortgages, and it was Wall Street underwriters that turned them into securities,"

But the big three rating firms (Standard & Poor's, Moody's Investors Service. and Fitch Ratings may a number of big mistakes on 200 on that contributed to the current financial crisis. these companies.

  • Did not downrate banks and mortgage companies that gave high-risks mortgages such as "piggyback" and interest-only loans.
  • They consulted with securities underwriters who put together the mortgage-backed securities in the first place.
  • Then they "gave top ratings to many securities built on the questionable loans, making the securities seem as safe as a Treasury bond."

And as the WSJ article explains, the subprime mortgage area has been a very profitable one for the rating firms.

Compared with their traditional business of rating corporate bonds, the firms get fees about twice as high when they rate a security backed by a pool of home loans."It was always about shopping around" for higher ratings, says Mark Adelson, a former Moody's managing director, although he says Wall Street and mortgage firms called the process by other names, like "best execution" or "maximizing value."


In turn underwriters shopped around to the rating firms to get a high rating, starting a downward spiral of rating objectivity. The high ratings tempted institutional investors, including pension funds, to buy into the mortgage securities market, something they would not do with a lower-grade rating. And the earnings were too good to be true, while most highly rated investments were getting ho-hum returns.

Interesting to us is the way in which all there agencies went along gladly. Oligopolies converge, and the thinking at the leading companies often comes to run in lockstep. Any of the three companies that sat out of the subprime frenzy would have drawn cruces form shareholders about getting lower profits than their the rivals. And if they all get themselves (and the economy as a whole) in trouble, the adolescent excuse that "everyone else was doing it" will be brought out.
.

[Oligopoly Watch]
10:29:37 PM    

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Tribune Co. News
On Eve Of Shareholder Vote, Some Investors Bet Tribune Deal Won't Happen.

Tribune (NYSE: TRB) shareholders at a special meeting Tuesday are likely to approve Chicago billionaire Sam Zell's complex $8.2 billion plan to take the company private. But that doesn't mean the actual debt-laden deal will get done; in fact, as the NYT reports, some investors are betting against it evan as Zell and the Tribune insist it will happen. When the market closed Friday, the stock was trading at a nearly 25 percent discount to the $34 per share promised last spring. The company's performance isn't helping with margins and revenue both weaker. The NYT walks through the optionsâo[per thou]none very attractive. Renegotiating the price would seem to make sense but a class-action probably would be filed before the day is out and less debt actually wind up costing higher interest rates.

Zell and Trib executives declined interviews with the Times. A written statement on behalf of the company: "Our going-private transaction is on track and the financing for it is fully committed. We anticipate closing the transaction in the fourth quarter, following F.C.C. approval, and expect to be in full compliance with our credit agreements."

Related

By (Staci D. Kramer). [paidContent.org]
10:23:03 PM    

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Bath, UK via paidcontent.org
Music Recommendation Site TheFilter Gets $5 Million Funding.

Music recommendation service and tech firm TheFilter, based in Bath, UK, has received $5 million in funding. The investment in TheFilter's parent company Exabre was led by musician Peter Gabriel, alongside Eden Ventures, and follows an initial $1.8m round of investment by the two parties and TheFilter's two founding members Rhett Ryder and Martin Hopkins. TheFilter is a free download that recommends new music and builds playlists from a user's existing digital music library...the new money will be used to help develop its expansion into new areas such as digital video and film content, reports The Independent. Gabriel invested in digital music provider OD2 a few years ago, which was bought by Loudeye and then by Nokia.

By  (Rafat Ali). [paidContent.org]
7:06:48 PM    

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Window Rock, AZ - Navajo Nation Fair
Things to Do in Arizona on Saturday September 8, 2007. Saturday, September 8, 2007 :: 61st Annual Navajo Nation Fair Venue: Navajo Nation Fairgrounds - Event Starts: 8:00am .. (345 words) [Arizona Reporter Newswire]
5:54:23 PM    

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Fantasy Football on Podshow
Fantasy Football Channel.

Using our new channels editor, pigskin radio is maintaining a channel of fantasy football shows. View the channel - RSS Feed

[CURRY.COM]
12:11:25 PM    

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© Copyright 2009 Gary Santoro.
 

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