TALF Eligible CMBS Could Shrink Dramatically
June 9, 2009
According to Deutsche Bank, the number of CMBS loans eligible for TALF could be cut in half if S&P adopts a new, more conservative rating.
If adopted, the proposal would likely result in downgrades to 95 percent of top-rated bonds issued during the peak of the real estate cycle in 2007, and 85 percent of CMBS from 2006, S&P said.
An eligibility requirement for TALF is a “AAA” rating. I discussed the S&P’s moves last week and how I felt that the S&P was being counterproductive on the one hand, and finally doing its job on the other. It’s a delicate balance, but I still believe that saving existing owners should be secondary to ensuring that the taxpayers don’t get stiffed again.
Click here for the full AP article
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What do you make of Fitch’s announcement that it says it will not be changing ratings. Do you think they’re trying to one-up S&P here?
I think they are risking long-term credibility for short-term gains here. It seems they want to one-up S&P here as you suggested and show the world that their rating system is/was superior. Part of the reason for this is that starting next month the FED is allowing both Realpoint and DBRS to rate CMBS instruments.
The problem is that Realpoint and DBRS don’t have to worry nearly as much about looking like fools much the way S&P looks like now, and I suspect Fitch will when it ultimately ends up having to downgrade many of those securities it previously rated AAA.