NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Nancy Wallace

Haas School of Business
545 Student Services #1900
UC, Berkeley
Berkeley, CA 94720-1900

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NBER Working Papers and Publications

July 2010CMBS Subordination, Ratings Inflation, and the Crisis of 2007-2009
with Richard Stanton: w16206
This paper analyzes the performance of the commercial mortgage-backed security (CMBS) market before and during the recent financial crisis. Using a comprehensive sample of CMBS deals from 1996 to 2008, we show that (unlike the residential mortgage market) the loans underlying CMBS did not significantly change their characteristics during this period, commercial lenders did not change the way they priced a given loan, defaults remained in line with their levels during the entire 1970s and 1980s and, overall, the CMBS and CMBX markets performed as normal during the financial crisis (at least by the standards of other recent market downturns). We show that the recent collapse of the CMBS market was caused primarily by the rating agencies allowing subordination levels to fall to levels that pr...

Published: CMBS Subordination, Ratings Inflation, and the Crisis of 2007-2009, Richard Stanton, Nancy Wallace. in Market Institutions and Financial Market Risk, Carey, Kashyap, Rajan, and Stulz. 2012

June 2010CMBS Subordination, Ratings Inflation, and the Crisis of 2007-2009
with Richard Stanton
in Market Institutions and Financial Market Risk, Mark Carey, Anil Kashyap, Raghuram Rajan, and René Stulz, organizers
 
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