S&P says ‘Oh crap. Us too’

Here we go again:

Standard & Poor’s, the credit rating agency, has told regulators it found an error in the computer models underpinning the credit ratings of complex debt products but that the glitch did not affect the ratings of the debt...

“We discovered one error in a trial version of one of our models that was used in connection with the initial ratings on five public CPDOs and briefly used for surveillance analysis,” said Vickie Tillman, executive vice-president at S&P, in a statement.

“This error did not result in a ratings change and was caught and remedied by our ratings process...In the interest of full transparency and openness, S&P has disclosed this situation to the SEC.”

S&P discloses errors in rating models
by Aline van Duyn and Joanna Chung
The Financial Times Jun. 13 2008

David S. Products translates Tillman’s doublebabble:

S&P has confirmed that they had an error in their CPDO model, although in this case—unlike Moody’s—the error did not cause the model to deviate from its intended inaccuracy.  Thus, the model correctly assigned the completely inaccurate rating of AAA.

Wait a minute. That bit about “full transparency and openness” must be wrong; I think she meant to say “In a desperate attempt to avoid criminal indictment.”

Earlier on NakedShorts

Moody’s gone wild
May 21 2008