TY  - JOUR
AU  - Benmelech,Efraim
AU  - Dlugosz,Jennifer
TI  - The Credit Rating Crisis
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15045
PY  - 2009
Y2  - June 2009
UR  - http://www.nber.org/papers/w15045
L1  - http://www.nber.org/papers/w15045.pdf
N1  - Author contact info:
Efraim Benmelech
Harvard University
Department of Economics
Littauer 233
Cambridge, MA 02138
Tel: 617/496-4787
Fax: 617/495-8570
E-Mail: effi_benmelech@harvard.edu

Jennifer L. Dlugosz
Federal Reserve Board
20th Street and Constitution Ave. NW
Washington, DC 20551
E-Mail: jennifer.l.dlugosz@frb.gov
M1  - published as Efraim Benmelech, Jennifer Dlugosz. "The Credit Rating Crisis," in Daron Acemoglu, Kenneth Rogoff and Michael Woodford, editors, "NBER Macroeconomics Annual 2009, Volume 24" University of Chicago Press (2010)

AB  - Since June 2007, the creditworthiness of structured finance products has deteriorated rapidly. The number of downgrades in November 2007 alone exceeded 2,000 and many downgrades were severe, with 500 tranches downgraded more than 10 notches. Massive downgrades continued in 2008. More than 11,000 of the downgrades affected securities that were rated AAA. This paper studies the credit rating crisis of 2007-2008 and in particular describes the collapse of the credit ratings of ABS CDOs. Using data on ABS CDOs we provide suggestive evidence that ratings shopping may have played a role in the current crisis.  We find that tranches rated solely by one agency, and by S&P in particular, were more likely to be downgraded by January 2008.  Further, tranches rated solely by one agency are more likely to suffer more severe downgrades.
ER  -