I always find these stories interesting but feel like I get lost when they get into the more arcane levels of derivatives. Here is my question; Given the experience of the Subprime mortgage debacle, and the inherent difficulty of understanding who is holding the liability of these derivatives, why doesn't S&P and Moodys just max out their credit worthiness rating at BBB. Just don't ever let them be A rated, at any level. Would that not "fix" the inversion if people are mistakenly believing that counter party interest swaps are "safer" than Treasuries? I'm really curious about that.
It's be better to fix the laws and regulations that treat the rating agencies' opinions as true facts about the riskiness of assets (e.g. SMMEA, 7 CFR 240.15c3-1, Basel III, many many etc.) than to apply a band-aid patch at the rating agency level. I'm not even sure the government could legally put in such a requirement as the rating agencies have asserted in litigation that their output is protected speech.
treasuries are always safer than bank credit because the us govt can simply print payment of coupons and maturity. the rest of the stuff in this thread is just nonsense.
