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> 5. Addressing concerns rose on rating methodologies and rating process: After analysis have been done on rating methodologies and procedures, updates effect on default rate, concerns raised by rating methodologies and rating process which have been discussed in professional and academic context have to be addressed. To address these concerns qualitative, qualitative analysis which have been done on rating methodologies and process, effect of updates on default rate have to be used. Moodys revenues and expenditures has been collected from moodys annual reports from moodys website. Moodys revenue have been used to analyze revenues gained by moodys in the process of rating which is one of the consern rised by one of the author in profissional and acadamic context. As it is qualitative analysis the conclusiosn is from the point of view my research.

6. Analyzing role played by rating agencies in financial crisis: after analysis have been done on financial crisis and rating agencies analysis have to done on role played by rating agencies in financial crisis. This analysis is to done with the help of conclusions drawn from analysis of financial crisis as well as rating agencies. Final conclusions have to be written summarizing role of rating agencies in financial crisis. As above it is qualitative analysis the conclusiosn is from the point of view research.

Chapter- 4

Data Analysis

4.1Analysis of Credit Crisis

Speaking through the paper about asset securitization and its effect on the financial sector and the economy as a whole it becomes very important to show the facts and s and how it affected the economy.

Mortgage market has increased in volume till 2006 for various reasons like low interest rate, increase in housing prices, lowering standards of lending. Let us analyze these factors and how these triggered financial crisis.

In response to detiorating economy in 2001 Federal Reserve slashed interest rates to expand money supply and encourage borrowing (-1). Federal Reserve slashed interest rates drastically and touched 1% in the year 2003. In central banking terminology it is zero interest rate. This slashing has encouraged more spending and investing. Low interest rate means banks can lend cheap loans to borrowers. Economy started to grow by the end of year 2002. At the start of year 2004 as economy started to grow and Federal Reserve started to increase the interest rate.

30- Year fixed mortgage rate(fig 2) is the rate borrower takes loan and is fixed throughout the loan period. The interest rate doesn't change with change in the Federal Reserve interest rate. 30- Year fixed mortgage rates have reduced till 20003 and from then it's almost constant (-2). Decrease in 30 year fixed mortgage rate means cheap loans.

So reduction in Federal Reserve interest rate as well as reduction in 30- year fixed mortgage rate made loans to be more affordable. In USA, the American dream is to have own home. This sentiment along with affordable loans made borrowers to investment in housing sector.

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