Moody’s has indicated that it might lower the ratings of monolines MBIA and Ambac. The possibility prompted New York Times columnist and blogger Floyd Norris to ask:
Has anyone thought in recent months that either of those insurers deserved its AAA rating?
Readers here will know we have harbored no such illusions. Last February, we expressed skepticism when Standard and Poor’s and Moody’s returned the monolines to AAA status. We said at that time,
Something is being stretched here -and it’s not just credibility.
Evidently, reality will play the elastic band only so far before it snaps back in the face. Conventional wisdom and billions in losses and write-downs notwithstanding, neither the real economy nor Wall Street is out of the dark and scary woods yet. You will soon see more than just the rating agencies change course and take cover once again.