Jim Grant on CDO market's dependency on ratings

A subscriber who has made a study of the subprime market - he is a long/short equity investor by trade - e-mails to share his observation that "somewhere in the neighborhood of 70% of CDO buyers rely almost entirely on the ratings because they don't have the time or expertise to evaluate the underlying collateral or structure." It follows, our reader points out, that "once the rating agency integrity is gone, so is the CDO market, it would seem."

~ Jim Grant, "Wheezing CDO machine," Grant's Interest Rate Observer, March 9, 2007