The ratings agencies did not have to calculate the risks of default on the basis of more or less subjective evaluations of a company’s business prospects. Nor did they have to render a judgment on a country’s fiscal policy. Instead, they could apply standardized financial mathematics to a population of mortgages that was assumed to have well-known statistical properties. If you knew default rates and could make assumptions about the degree of correlation between them, once you assembled enough mortgages and tranched them,
