"Fundamentally flawed, unreasonable and irrational."
In 2006, ABN Amro created a new type of financial instrument, the constant proportion debt obligation (CPDO), and sold a number of them to 15 local councils in Australia. Standard & Poor's rated these CPDOs as AAA.
The Federal Court of Australia has now determined that both ABN Amro and S&P are liable for the losses the councils suffered when the value of the CPDOs collapsed during the financial crisis; the councils lost 90 per cent on the deal. S&P's rating of the CPDOs was found to have been "misleading and deceptive". Felix Salmon provides some analysis. [more inside]
posted by kithrater
on Nov 6, 2012 -