Friday, October 24, 2008

Greenspan - Bad data hurt Wall Street computer models -

Greenspan - Bad data hurt Wall Street computer models -
"Greenspan told the committee. 'The whole intellectual edifice, however, collapsed in the summer of last year because the data inputted into the risk management models generally covered only the past two decades a period of euphoria.'

He added that if the risk models also had been built to include 'historic periods of stress, capital requirements would have been much higher and the financial world would be in far better shape today, in my judgment.'"
The NY Times also added that SEC Chairman Christopher Cox
"told the committee that credit rating agencies gave AAA ratings to mortgage-backed securities that didn't deserve them. "These ratings not only gave false comfort to investors, but also skewed the computer risk models and regulatory capital computations," Cox said in written testimony.
The NY Times has about 10 minutes of the testimony. It cannot be embedded like the Youtube one below, but is much better.

Here is some video coverage of Greenspan's testimony:

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