If you're unable to conduct an independent risk assessment because the piece of paper is too complicated, then you do not buy the piece of paper.
If you're an institutional investor then you should have that capability, unless the security in question is excessively complicated (in which case you don't want to buy it). If you're not an institutional investor, then you shouldn't be playing in the capital markets with money you can't afford to lose.
by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Apr 27th, 2010 at 10:32:02 AM EST
Rating agencies like S&P don't buy anything and their ratings have almost nothing to do with checking underlying data on securities. They just set the odds based on reported information. Institutional investors, on the other hand, should have the capability of analyzing the data before they buy anything, and most did. But it still didn't save them from getting burned because lack of data wasn't the problem. It was their beliefs and models about how the world worked that were wrong.
by santiago on Tue Apr 27th, 2010 at 10:43:57 AM EST