Wednesday, December 02, 2009

In the Spirit of Famous Last Words

Frank Fabozzi, page 115 of his edited volume The Handbook of Mortgage Backed Securities, 2006 edition:

"Based on historical experience with financial guarantees by monoline insurers, capital market participants have a high degree of confidence in bond insurance because no investor in any bond-insured security failed to receive a single timely payment of principal or interest. Moreover, downgrade risk is viewed as minimal because no US financial guarantee company has been downgraded. Investors realize another benefit from bond inusrance. While rating agencies face reputational risk when assigning a rating to a security, monoline insurers are placing their won capital and credit at risk. Hence investors can correctly expect that the transactions structure is inherently safe and will remain so over the life of the securities guaranteed."

Joseph Stiglitz, Jonathan Orszag and Peter Orszag, "Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard," Fannie Mae Papers Vol. 1, Issue 2 March 2002:

"These results regarding the risk-based capital standard are striking: They suggest that on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero. Given this striking result, it may be worthwhile exploring three potential shortcomings in the standard. None of the potential shortcomings appears to be significant enough to alter the basic conclusion that the risk-based capital standard provides substantial protection against insolvency."

Dr. Michael Schlesinger, as quoted on Roger Pielke Sr.'s climate blog:

"As documented in the IPCC AR 4, it is not possible to replicate the observed warming due to natural causes -- the sun and volcanoes -- alone. Such replication can be done only by including the effects of the human-generated increase in the concentrations of greenhouse gases.

Thus the case of the causes of the observed climate change is closed, period -- RSP or any other climate skeptic notwithstanding."

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