09 Mar 1992: The SEC Hits the Nail on the Head

Talking about the SEC is like talking about “the Chinese government,” “the United States,” or any other large assemblage of people that are made up of different factions with different personalities, subcultures, policy preferences and goals.

The SEC Division of Investment Management, in 1992, published a very comprehensive report, Protecting Investors: A Half Century of Investment Company Regulation, which speaks frankly about the risks of structured finance to investors. In the first chapter, a rationale  is put forth for exempting the structured finance market from the registration requirements under the 1940 Investment Holding Company Act. Since the 1940 Act was established after the Crash of 1929, which was to the equity market what the Credit Crisis was to the debt market, induced by many of the same lies and fabrications, and led by some of the same institutions, it is worth a close read.

If you are not aware of the parallels (I was not prior to 2003) an insightful companion reader is John K. Galbreath’s The Great Crash of 1929. That was the inspiration of the talk we gave in early 2004, which left the attendees cold.

The Meaning of Credit Ratings

 • The Meaning of Ratings
• The Naïve Rating Agency
• CBOs and 1920’s-style Investment Companies: Déjà vu all over again?

Ann E. Rutledge

Principal, R&R Consulting
Adjunct Assistant Professor of Financial Management
NYU School of Continuing and Professional Studies

Sylvain R. Raynes

Principal, R&R Consulting
Adjunct Assistant Professor of Financial Management
NYU School of Continuing and Professional Studies

Thursday, January 15, 2004
8:30 – 10 a.m.
Princeton Club
15 West 43rd Street, NYC

Speakers

Ann Rutledge and Sylvain Raynes are structured analysts with over twenty-five years’ collective experience in managing structured risk. They worked together in the Structured Finance Group of Moody’s Investors Service, beginning in the mid-1990s. In May 2000, they formed R&R Consulting, a New York-based structured credit metrics boutique. R&R’s clients include rating agencies, governments, universities, and global banks.

Through 1999, Ann Rutledge was VP/Senior Analyst for Moody’s, both in New York, where she worked on the ABS and ABCP teams, and in Hong Kong, as the solo member of the local team. She successfully led Hong Kong’s first AAA MBS deal in an atmosphere of financial turmoil.

During her tenure, ISR named Moody’s for the first time as best rating agency for Asian structured finance, and Moody’s share of rated transactions increased dramatically. In the mid-1990s, she served the advisory group of J.P. Morgan Securities Asia, in infrastructure finance, and before that, managed Morgan’s exchange-traded derivative business in Asia. Ms. Rutledge also helped to put the Hong Kong Futures Exchange back on the map in the early 1990s, with clearinghouse reform initiatives, member training and the listing of the Hang Seng Option.

A speaker of Mandarin and Cantonese, Ms. Rutledge received her M.B.A. from the University of Chicago and her B.A. from Wellesley College, where she also was elected to Phi Beta Kappa and received the Wellesley-Yenching Fellowship.

For the past ten years, Dr. Raynes has been involved in various aspects of financial analysis involving a wide array of asset classes and concepts. At Citicorp, he was responsible for the design of a credit loss analysis model of a $30 billion credit card portfolio. At Goldman Sachs, he was involved in the statistical modeling of derivative products and in many other credit-based initiatives. As a senior analyst at Moody’s, he continued to focus on the credit aspects of exotic assets (royalties, structured settlements, aircraft leases, non-performing loans, insurance premiums); he helped structure new financial instruments and was the lead analyst in landmark tax liens and defaulted receivables securitizations.

More recently, at Credit Suisse First Boston and Paine Webber, he expanded his knowledge of corporate finance and the capital markets through his analytical work in connection with loan portfolio risk assessment, as well as structuring collateralized loan obligations and aircraft leasing transactions. Dr. Raynes holds a Ph.D. in aeronautical engineering from Princeton University and a Masters in numerical analysis from the von Karman Institute in Brussels, Belgium. He is a fluent speaker of English and French.

Dr. Raynes and Ms. Rutledge are co-authors of The Analysis of Structured Securities: Precise Risk Measurement and Capital Allocation, published by Oxford University Press in 2003. Reviewers of their book commented:

“Much has been written about structured finance and rating, but nothing compares to this truly unique book. To my surprise, I could not put it down, as each chapter beckoned of more to come. The authors lay out solutions to the practical problem of rating debt securities in the structured finance context. They do so by explaining and analyzing with brilliant simplicity the theoretical foundations of rating…. This book is a ‘must read’ for anyone involved in structured finance. In light of the recent market failure, securities rating is indeed of interest to many investors. In fact, this book offers fascinating reading to anyone interested in the ways we seek to predict the future. ” – Tamar Frankel, Professor of Law, Boston University

“The reader who masters this book will be well prepared to address the important issues in today’s structured securities markets.”  – Perry D. Quick, Vice President, Charles River Associates

Host

The Center for Finance, Law and Taxation at NYU’s School of Continuing and Professional Studies (SCPS) offers over 130 noncredit courses in 15 certificate programs enrolling some 2,000 students each term, including Financial Risk Management, Portfolio Management, Structured Finance, Corporate Governance, Forensic Accounting, and Intellectual Property Law. The Center also offers a nationally recognized Institute on Federal Taxation, which has just completed its 62nd year, and highly regarded diploma programs in paralegal studies and credit analysis.

The Center’s Certificate in Structured Finance program was developed by Ms. Rutledge and Dr. Raynes and launched in Fall 2002. This rigorous six-course sequence offers financial analysts, financial engineers, attorneys, accountants, tax specialists, and other securities market participants the chance to gain an in-depth understanding of basic structuring concepts and methods of relative value determination. Students entering the program need not have specific experience with securitizations or project finance, but should be familiar with finance theories underlying the capital allocation decision.

The Structured Finance faculty also include Glenn Arden, Esq., partner and head of the worldwide securitization practice at Jones Day, and James Mountain and Terry Meyers, partners at Deloitte & Touche.

Founded in 1934, NYU’s School of Continuing and Professional Studies (SCPS) offers a variety of graduate and undergraduate degree programs as well as 120 different noncredit programs. SCPS’s business and professional centers include the Real Estate Institute, the Center for Finance, Law and Taxation, the Center for Advanced Digital Applications, and the Preston Robert Tisch Center for Hospitality, Tourism and Sports Management.