Goldman Fund Shuns Ratings Agencies With New Strategy

Reuters:

LONDON, May 1 (Reuters) - Goldman Sachs's (GS.N) fund arm is developing a new global credit strategy for institutions that will rely on market prices rather than heavily-criticised credit rating agencies.

"Clients often give investment guidelines determined by credit ratings, but we don't think that's the way to think about risk," said Andrew Wilson, global co-head of fixed income and currency at Goldman Sachs Asset Management (GSAM).

Read the whole story: Reuters

Comments

[davidwayneosedach]

What novel strategy will they employ to avoidpaying a cent back in taxpayer funds?

[loki]

Ironic, when the rating agencies dont do what capitalist want, they are shunned and shot down.
When the rating agencies report wrongly and ruin a consumers rating, they are applauded.

[tomasedison]

To be completely honest about it, the existing ratings agencies should be driven out of business for the job they didn't do prior to the credit panic.

[ibsteve2u]

What a deal - you get to break the old system AND implement a new system?

What makes me think Goldman is going to make out like a bandit on this, too?

[AnnfromCA]

Rating agencies are no longer even relevant. When securitized loans are not honored by the bankruptcy laws and the president threatens them if they actually stand up for their legal rights, then there is nothing but sheer chaos.

No ratings mean a darn thing.

[Mike169]

Here's a surprise! You mean Moody's, S&P et. al. were lying! Will wonders never cease?

[PartyPartyParty]

To paraphrase Casablanca:

Greenspan: "I'm shocked, SHOCKED that gambling is taking place in the market!"

Toady: "Here are your profits from over-valued derivative sales, Mr. Greenspan."

Greenspan: (sotto voce) "Oh. Thank you very much." (louder) "Out with the fraudsters!"

[Spesabsquemetu]

Oh, this is RICH!

Goldman Sachs wants to REDEFINE the MEANING OF RISK - even as the Bush team REDEFINED THE MEANING OF TORTURE!

See? We're learning from our leaders.

[JPHR]

Eron reduced the big five accountancy firms by one. The remaning four never even noticed toxic assets or over leveraged positions leading up to this crises. So please tell me what value or credibility is left with US GAAP or the accounting profession.

[JPHR]

Now let's see how long it takes them to manipulate these spreads......

[marinade]

And it took a collapse for Goldman Sachs to figure out that the ratings were fraudulent.....right....

[rayoflightinaseaoffog]

The problem is the rating co.s and how they are paid. A better system is needed.

In 2003 it was obvious to those in the mortgage and construction industries that there was a housing bubble in the process of inflating. In 2004 I saw in a couple of articles that the rating agencies had essentially abandoned sample testing of the mortgages that were being bundled into mortgage backed securities. They instead had decided to use mathematical formulas based on historical defaults, payoffs etc. Knowledgeable people knew that those getting mortgages did not meet the same criteria as those who had gotten mortgages in the '80s and '90s; therefor the ratings based on these formulas were bogus. The massive amounts of mortgage backed securities being sold made a financial collapse inevitable. I started preparing.

The rating co.s were forced to do this because the co.s creating the securities could shop around for the one that would give them the best rating. The rating co.s, being profit based co.s adjusted their actions to give them the best profits to report to their stockholders and the analysts who tracked them just like the mortgage packagers and mortgage companies were doing. This is guaranteed to happen in unregulated capitalism where short term profits are the only criteria of success.

[jsgaetano]

Well, Goldman should know how unreliable ratings are. They were one of the world leaders in undermining rating agencies.

[JJeff88]

Just wondering, but is the problem that ratings agencies didn't perform and should therefore be eliminated in favor of some form of a "Fox Guarding the Hen House" model?

Or can (& should) the ratings agencies be reformed?

Maybe Goldman has a better way, but having a financial house say: "trust me" makes me nervous.

[jsgaetano]

The real problem was the profit motive corrupted the ratings agencies.

The only way to make ratings fair is to make it impartial and remove any profit motive. But... that's never going to happen- it makes too much sense, and the "Piratize Everything" crowd would cry several rivers over it.

[pundit27]

Nationalize 'em. Who ever heard of a referee working for one team? The agencies have proven their worthlessness; why the debate over this?

[swift goat pet for truth]

can't imagine why

[TrooAmerican]

Who downgraded them? .... Themselves? lol

Onion-
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