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CMO AAA Rating explanation

                I was asked by a friend, “How the F did the Collateralized Mortgage Obligations got rated AAA during the no doc fraudulent lending era”.  He said, “Even I, someone not from a financing background could clearly see that the rating of the debt should have been closer to junk status”.  Well, let me explain…you see, anyone who has passed a serious 7 exame knows that lending agency debts are automatically rated AAA because they are either backed by the full faith of the US government (Gimpy May) or “implied” to be fully backed by the US government (Freddy Mac and Fanny Pac).  Because of this backing, it did not matter that the mortgage had been given to a strawberry picker whose credit rating was 400.  In the end, it was the US government that was the underwriter.  As evident of the bail out, we all know this to be 100% accurate.  This also explains why no one is going to jail, getting fired or prosecuted from the rating agencies.

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