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Would the investment banks have bought sub prime loans if they were not able to have them sold them rated AAA?

It appears to me that the AAA rating assigned to bonds, made up of sub prime mortgage securities, made the sub prime loans feasible. After all if the investment bankers could not sell the sub prime mortgage bonds why would they buy the sub prime loans in the first place? The investment bankers probably knew they could get the credit rating agencies into assigning the AAA rating. Then investors would be confident they were buying a safe conservative investment that was rated AAA from the investment bank.

It appears that the AAA bond rating is the linchpin in whole sub prime structure.

What do you think?

2 Answers

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  • Anonymous
    1 decade ago
    Favorite Answer

    Your right it is. That issue is already known and the CRA has been criticized for it. They were putting AAA ratings on high risk CDO's.

  • npk
    Lv 7
    1 decade ago

    Absolutely no doubt that the credit rating companies were as guilty as sin in the CDO fiasco. They were putting lipstick on pigs and pronouncing them beauty queens.

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