Triple-A securities did not turn into junk, they were junk made into triple-As, simply because there are not enough real triple-As to go around.

Sir John Gapper writes “this crisis was of a severity beyond others in the past, and triple-A securities were at its heart” ‘Time to rein in the rating agencies” April 29. The first letter of mine, and that you published on January 12, 2003 ended with “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic error to be propagated at modern speeds”. At last count I have sent you 391 letter more on this topic and so it would seem that after a definite statement like Gapper’s I should now be able to let it go. Not yet!

When Gapper in his quite comprehensive article states “If all the subprime mortgage securities they rated triple A had not turned to junk…” he completely misses the point. It was the shear existence of the credit ratings that, when combined with absurdly low capital requirements for banks when lending or investing in triple-As, which provided all the incentives for the markets to manufacture the “junk”.

Given the possibility of accessing a triple-A rating the worse the mortgage, the higher the interest rates, the larger the difference between the real and the perceived value and therefore the larger the profits.

Sir, please grow up and face the facts of life. There are not enough true triple-A investment opportunities to go around for all the coward capital that exists in the world. Pursuing triple-As too much will either lead us to false triple-As or to absolutely unproductive triple-As, like putting your savings in a mattress and having it stored at Fort Knox, paying a custodial fee.