The issue isn't that the models are wrong, it's that the process should never have happened in the first place.
No one should be trying to model crap like this. It's madness even trying to get a sensible market value out of 'assets' that by any sane standard are either worthless, or close to worthless.
But as you say, it has happened for political reasons. This is one big political scam, and should be acknowledged as such.
It's been as much about social engineering, giving a sputtering economy the illusion of bouyancy so that approval ratings remain high among the peasants, and the have-mores can maintain their culture of entitlement, as about the specifics of risk modelling.
As the ARMs reset and the US starts to see an astonishing new wave of homeless bankrupts, it needs to be remembered that this was as much a political feint as a financial pyramid.
