As trickle down economics brought the Republican financial collapse to a head in 2008, it became clear that the stellar ratings for mortgage backed derivatives were as bogus as the derivatives themselves. The rating agencies claimed that a few incompetent analysts were the cause. If there was any corruption, they said, it was a few bad apples at the analyst level. I didn’t believe them then, and there’s a better reason not to believe them now, as Suzie Madrak reveals.
Anyone with half a brain knows that the ratings agencies (and not just Moody’s) were deeply involved in covering up the whole industry built around toxic derivatives. My question, as always, is: What is anyone going to do about it? Is anyone at the top of this crappy pyramid scheme ever going to jail?
WASHINGTON (Reuters) – An ex-Moody’s Corp derivatives analyst said the credit-rating agency intimidated and pressured analysts to issue glowing ratings of toxic complex, structured mortgage securities.
In a 78-page letter to the Securities and Exchange Commission, William Harrington outlined how the committees that make the ratings decisions are not independent and how managers often intimidated analysts.
"The management of Moody’s, the management of Moody’s Corporation and the board of Moody’s Corporation are squarely responsible for the poor quality of previous Moody’s opinions that ushered in the financial crisis," he wrote.
… [emphasis original]
Inserted from <Crooks and Liars>
There can be no doubt that Moody’s, at least, cooked the books. Since all three companies gave the same glowing ratings on the same worthless paper, we can safely conjecture that all three cooked the books in cahoots with the Banksters who scammed unsuspecting investors.
Like Suzie, I wonder if any of these crooks will ever come to justice, or will the SEC shred the records of this investigation too?
15 Responses to “Moody’s Cooked the Books on Derivatives”
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Similar ratings are used to get YOUR credit rating…..these ‘ratings’ are neither relevant nor very accurate in terms of the reality in the street. One may decide to pay their mortgage on time, but neglect their magazine subscription or even a revolving credit card and WHAM, suddenly your good credit is GONE…..unlike the way government pays it’s bills, btw. Bankers are going to find that soon, no one can meet their ridiculous standards!
Good point, Zada, but do you think that our credit ratings are cooked intentionally?
Personally I think everyone in the SEC is culpable and that all 3 credit rating agencies who rated CDO’s as AAA should be legally dibanded along with their buddies at equifax and the other two holding agencies and I believe that Goldman Sachs (et al) should fund the rebuilding of a new trustworthy oversight commission with board members subject to public election and recall same as every other DC power broker. Reich and Krugman would be my first nominations.
good idea– the only thing is a complete redoing of all of the system
Like Patty. I agree.
The politicians are too far in these scumbags pockets to even consider any type of reform of the SEC.
Tom, you know damn well that anything that implicates them in wrong-doing will be destroyed.
That’s a sad truth.
WTM: Yes.yes.and yes. Who has the power to investigate and hold criminally responsible the SEC?
The POTUS? The Justice Dept.? Elizabeth Warren could have pushed hard in this direction despite the impediments including Geitner and Co. Perhaps as Senator she will achieve this with her Senate colleagues if there are enough who care about truth, honesty, and the American way, over their own accumulation of wealtrh of power, the kind derived by ‘bleeding and killing” others.
Please Note: The SEC Director of Enforcement was formerly Chief Counsel at Deutsch Bank. I’m sure you noticed every criminal prosecution against Goldman Sachs and the lot of them handled resulted not in restitution and prison time but each case was settled out of court for a tiny fraction of the economic damage done to investors.
Your approach to the SEC should also be the same for the CFTC (Commodities Future Trading Commission).
Gesler and his Commissioners and their failure to perform their statutory responsibilities to the American people have resulted in hideous fake inflation in food stuff and energy in the USA and globally.
Case in point:
Just Thursday last, the price per barrel of either Texas Intermediate Crude or Brent cost $88.00 approx.
Yet, gas per gallon at our gas stations for regular is just close to $4.00 a gallon! Total disconnect.
Decent bread at $4.00 a loaf?????? While unemployment continues unbated because there are no jobs..
and there will be no jobs in the USA that pay a wage to a minimum make it possible to live here, until
US Congress and President grow spines and brains and change the financial and investment landscape for
these corporations.
But first things first. The financial commission headed by phil angelides failed to go the distance and skewer derivatives and either ban them from financial markets or regulate them to the hilt.
If citizens in every State and in every Congressional District could collectively keep this issue of derivatives and these slimy crooked ‘rating’ agencies on the front burner. they must get a kick in the pants that never stops until derivatives are smashed into a thousand smithereens…
Welcome Dianne. 🙂
Very well put and dead on.
The major problem began when the role of the Big Three (Moody’s, Fitch, Standard & Poor’s) evolved from that of analysts to that of consultants. (Let’s not forget that only four days before Enron filed for bankruptcy, the Big Three were still giving Enron their approval as a “Buy” investment.)
Their role as consultants to the companies that hire them to turn around and “rate” their products creates such a clear conflict of interest that it renders their ratings as useless at best – and potentially disastrous at worst.
Excellent analysis.
1.The credit agencies should be an entirely separate agency that is not subject to the pressure of the banks.
2. The CDOs and CDS’ were coming in so fast that no one had the time from their managers to review them; and the managers should have reviewed what the analysts did.
3. The entire process was managed poorly and without over sight from the SEC who was totally kept in the dark.
4. The SEC should have picked a sample of these CDO’s and CDS’ to see if they conformed to the law and that they didn’t hurt consumers.
All in all, the credit agencies and the SEC dropped the ball on this and should reimburse the consumers that they hurt all because they cut corners and made asses out of themselves. Who’s going to believe what they say now?
1. Yes
2. Couldn’t standard formats be required?
3. Yes
4. Yes
Amen
Does anyone else think that there was systemic willful ignorance on the part of Congress and all the financial regulatory agencies? After all, it didn’t take a genius to see what was occurring, as evidenced by the many hedge fund and bank managers (Deutsch Bank) who shorted CDO’s and the AAA mortgage bonds. They had to know this was a train headed off a cliff, but who wants to shut down a thriving economy?
Our financial services industry reminds me of the Iraq wars during the first 6 years — a complete goat fuck. So bad, you’d have to completely tear it down and start over. Politics and finance are now so intertwined, it makes my head explode to think about how to fix it.
But a healthy start would be to rescind Citizens United (we are officially back to before the Nixon administration) make elections a maximum of a one-year period, funded solely by public contributions.
Well put, Ann.