Ratings agencies nailed.
Robert Waldmann
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“We went to the ratings agencies and said, ‘Wouldn’t this information be great for you to have as you assign tranche levels of risk?’ ” Mr. Johnson testified last week. But none of the agencies took him up on his offer, he said, indicating that it was against their business interests to be too critical of Wall Street.
“If any one of them would have adopted it,” he testified, “they would have lost market share.”
The investment banks who paid Clayton Holdings for the analysis used it to get the mortgages for a low price but didn’t share the data with investors. Both the investment banks and the ratings agencies defend themselves noting vague statements about declining underwriting standards in prospectuses and “research and commentary” respectively.
Clearly the vagueness was deliberate “some loans in the pool don’t meet the declared standards” is no briefer and less informative than “most loans in the pool don’t meet the declared standards.” It is almost as clear that no one will pay penalties proportional to the direct harm to investors (let alone the indirect costs of the crisis). Morgan Stanley executives settled out of court with the State of Massachusetts for $102 million — and laughed all the way back to their bank.
I’m going long pitchforks.
CNBC did a special on this some time ago and rerun it regularly.
Really disgusting.
The real question is, “Has anything truely changed?”
My bet no…
And none of these guys will see a pitchfork, except at the stables they quarter their horses at. Too many politicians from both sides had their hands in the cookie jar – and most like hob-nobbing with the rich (whom they think are their equals but in reality the politicians are just another tool for the rich, like the guy using the pitchfork in the stables).
How’s that hope and change working out these days?
Islam will change
Does this mean that when Moody’s downgrades “The United States of America” that we don’t have to worry?
buff
i never had much hope for hopey changey, but if you are implying we all shouldda stuck with the Grand Ol’ Party, it won’t wash, you know.
Actually, no US rating agency will downgrade The United States of America, at least until the name change becomes official.
It will just be a quiet surprise when no one shows up at Treasury auctions except for the Federal Reserve.
When that happens, the Fed will probably claim they are providing debtor in possession financing, the Supreme Court will oversee re-organization, and the surviving entity will most likely be named The Federal Reserve of The Americas. Warren Mosler will be appointed new President of The Federal Reserve of The Americas, but we will have to guess who he will appoint to the rest of the 12 member board.
All rating agencies will be banned at that point, because we will just know that all money and credit is good!
coberly,
Not implying that teh GOP would have done any better (I think I said that).
Just pointing out ol’ hopey changey is not any better.
Islam will change
Dear Coberly
I think this is why we don’t have to worry about Moody’s downgrading treasuries. Just imagine a conversation in which someone from Treasury sighs and says “yes we blew our credit bailing out banks and saving the economy in the crisis caused by some idiots who rated toxic waste AAA. Nice nationally recognised statistical ratings agency you have there. It would be a damn shame if (whoever decides which ratings agencies are nationally recognised) were to do something to it.
I think that Moody’s will be saying. Yes Sir. still AAA Sir. In fact we would have invented a AAAA rating for you if the phrase “super senior” didn’t make us scream.
waldmann
thanks.
i was being sarcastic myself, but your story beats mine.
Anything Mr. Johnson said to the FCIC SHOULD be old news to at least those on the INside. Clayton cut a deal with the NY AG for civil and criminal immunity back in Jan ’08 or so. Whether or not what Clayton said back then ever saw the light of day is another story…
I always wonder if the people who claim massive efficiencies by reducing regulations account for the cost of messes like this one as part of the price of deregulation.
If you want to sell me on deregulating electricity convince me it’s worth an Enron. Telecom? WorldCom, Adlephia etc. Banking? AIG, Lehman, etc.