Rating risk – What does “AAA” actually mean?
Original image source
WASHINGTON — Credit rating agencies would lose their formal role in evaluating certain bonds backed by consumer loans, like home mortgages, under rules proposed on Wednesday by the Securities and Exchange Commission.
Instead, The companies issuing these bonds would have to vouch for their soundness… (and) also be required to keep a chunk of the securities in their own portfolios so that they retain some of the bonds’ risk, under the S.E.C.’s plan.
The asset-backed securities that would be affected by the new rules are bundles of loans, like residential mortgages, student loans or automobile loans. They are converted to bonds for sale to investors, whose returns are generated from the payments on the loans.
The companies selling the bonds would also have to give the government extensive information, in a form that is easily searchable, on all of the individual loans that make up the portfolio behind the bond offering, and update it on a continuing basis. » The full New York Times article – By Edward Wyatt.
- The New York Times – Learning Network – Understanding Credit Cards and Credit Card Debt -
Overview: Students examine and learn the basics about credit cards and credit card debt, then create an informational brochure for young students. Go to this Economy and ESL Lesson.- The New York Times – Learning Network – A Plan for Recovery-
Overview: Students examine the “who, what, where, when, why and how” of the proposed stimulus plan for the U.S. economy; they then write their own proposal outlining how stimulus funds might benefit their community. Go to this Economy and Society Lesson.- The New York Times – Learning Network – Examining Key World Economies and Comparing Their Current Volatility -
Overview: Students review key economic terms and ideas necessary for understanding world economies. They then research the economies of countries in the Group of 10 and present how their economies have changed over the past five years and how the relationships among these countries affect each other in light of world events. Go to this Economy and Society Lesson
