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Commercial Grade is a post by John Cicero, MAI who provides commentary on issues affecting real estate appraisers, with specific focus on commercial valuation. John is a partner of mine in our commercial real estate valuation concern [Miller Cicero, LLC](http://www.millercicero.com) and he is, depending on what day of the week it is, one of the smartest guys I know. …Jonathan Miller

There is no shortage of villains in this market meltdown (see CNN’s 10 Most Wanted Culprits of the Collapse). Henry Waxman, Chairman of the House Committee on Government Oversight and Reform, even got a concession from Alan Greenspan that he was “partially wrong in opposing regulation of derivatives” and acknowledged that financial institutions didn’t protect shareholders and investments as well as he had expected.”

Though there has been lots of finger pointing, I think that the rating agencies are getting off way to easily. Sure, they’ve been scolded, but considering the extent of the fallout and their role, more than a slap on the wrist is in order. Today’s New York Post reports how the credit rating analysts saw the collapse coming years ago, but did nothing because it was such profitable business.

Over the years, I couldn’t understand how so many inflated appraisals prepared for the investment banks got by the rating agencies, the supposed watchdogs. As I’ve said in past posts, my firm sat on the sidelines when it came to CMBS appraisals because we didn’t play the game, and the rating agencies, who were supposed to be the game referees, were on the take. Where is the outrage over their conduct and why haven’t those senior executives been shown the door?


One Comment

  1. marty October 28, 2008 at 12:20 pm

    the reason the rating agencies have escaped is that they are owned by larger corporate entities that are inextricably tied in with the Wall St wizards-i.e. there is a greater symbiosis between them & Wall St than there is with the appraisal industry which does not even register on the radar. Appraisers are and will always be the low man/woman on the totem pole as long as they are independent small operators and thus subject to fee cutting pressures & the promise of new business if they play ball. The wizards will think nothing of trying to save $500 or $1,000 on an appraisal assignment while not even concerning themselves with kissing off hundreds of thousands or millions of $$ on a loan because the appraisal fee is hard dollars coming out of their operating expenses while the higher the loan & its proceeds the higher their fees. The end of securitization as its recently been practiced may put an end to this practice but only if they have some skin in the game which is doubtful. We need to have more appraisal shops going defunct along with investment banks and then maybe we could have some balance between supply & demand instead of shops groveling for cut rate fee assignments who shouldn’t be in the business in the first place.

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