No Flies on Fitch, or, Lehman Brothers Laffs

Brian Doherty | September 15, 2008

Fitch Ratings makes a pretty bold move in an announcement this morning on Business Wire:

Fitch Ratings has downgraded the long- and short-term Issuer Default Ratings (IDRs) and outstanding debt ratings of Lehman Brothers Holdings Inc, (LBHI), parent of Lehman Brothers Inc and other subsidiaries as follows:

--Long-term IDR to 'D' from 'A+';

--Short-term IDR to 'D' from 'F1';

--Senior debt to 'CCC' from 'A+';

--Subordinated debt to 'C' from 'A';

--Preferred stock to 'C' from 'A'.

Fitch's slogan? "Know Your Risk." Know, then, your risk on relying on their wisdom that a company with an A+ debt rating will keep that exalted status until shortly--but, mind you, very shortly!--after it declares bankruptcy.

Comments

|9.15.08 @ 11:03AM|#

Fitch Ratings Ltd. --Long-term IDR to 'D' from 'A+';

JMR|9.15.08 @ 11:15AM|#

The really fun ratings are on debt of the rating agencies themselves. When THAT one hits the fan it will be "interesting" in the Chinese curse sense of the word.

|9.15.08 @ 11:18AM|#

MDB* Investments - improving your investment returns on day one.

*Monkeys, darts, business section

Invisible Finger|9.15.08 @ 11:37AM|#

The amazing thing is hardcore financial junkies knew Lehman was in trouble when Bear Stearns was going down.

But it is porrof that the free market works - when the market demands bullshit, lots of suppliers will come along to meet it.

Invisible Finger|9.15.08 @ 11:38AM|#

And I'm coining a new term - "Porrof". Should change my handle to Invsible Fat Finger

Perry|9.15.08 @ 11:42AM|#

The ratings agencies share just as much if not more of the blame on what is happening than the banks themselves.

mike|9.15.08 @ 11:47AM|#

Everyone tries to simplify this whole mess but it is not just about bad mortgage loans but also unfettered short selling (stocks are not commodities) and irresponsible financial reporting from the likes of CNBC and WSJ. Too many 'reporters' saying things and tossing around figures that are either meaningless, wrong or completely twisted which is worse than yelling fire in the crowded theater.

I, Kahn O\'Clast|9.15.08 @ 12:18PM|#

The rating agencies are a joke. The work for and are paid by the companies issuing the debt, not by the investors they claim they are working for. They always give the benefit of the doubt.

Sure bondholders would likely have been paid had Barclays or BofA bought Lehman but the risk was very high that they would not. To assume the upside rather than the downside even if the odds were even (they were not) is ridiculous.

Bingo|9.15.08 @ 12:46PM|#

Perry: Agreed. Why were these rated so high to begin with?

lol what?|9.15.08 @ 12:57PM|#

I'll express the view of probably the vast majority of the American people in saying, with great sincerity, that I have no fucking idea what any of those terms even mean.

Jerry|9.15.08 @ 1:44PM|#

Lehman bonds have gone for .60 on the dollar since early August. No wonder they couldn't raise any capital.

The Extispicator|9.15.08 @ 2:40PM|#

The Extispicator downgrades Fitch's analysis quality from "A-" to "No Shit, Sherlock"