The Last Mystery of the Financial Crisis (How the rating agencies conspired with the big banks)

The Last Mystery of the Financial Crisis
It's long been suspected that ratings agencies like Moody's and Standard & Poor's helped trigger the meltdown. A new trove of embarrassing documents shows how they did it

"Lord help our f###ing scam . . . this has to be the stupidest place I have worked at," writes one Standard & Poor's executive. "As you know, I had difficulties explaining 'HOW' we got to those numbers since there is no science behind it," confesses a high-ranking S&P analyst. "If we are just going to make it up in order to rate deals, then quants [quantitative analysts] are of precious little value," complains another senior S&P man. "Let's hope we are all wealthy and retired by the time this house of card[s] falters," ruminates one more.

Ratings agencies are the glue that ostensibly holds the entire financial industry together. These gigantic companies – also known as Nationally Recognized Statistical Rating Organizations, or NRSROs – have teams of examiners who analyze companies, cities, towns, countries, mortgage borrowers, anybody or anything that takes on debt or creates an investment vehicle.

Their primary function is to help define what's safe to buy, and what isn't. A triple-A rating is to the financial world what the USDA seal of approval is to a meat-eater, or virginity is to a Catholic. It's supposed to be sacrosanct, inviolable: According to Moody's own reports, AAA investments "should survive the equivalent of the U.S. Great Depression."

It's not a stretch to say the whole financial industry revolves around the compass point of the absolutely safe AAA rating. But the financial crisis happened because AAA ratings stopped being something that had to be earned and turned into something that could be paid for.

Link

Great article and long but it needed to be said. Well, it is about time for this story to hit the mainstream. For those that follow financial blogs this news is not new. People need to know that the fish stinks from the head down.

Is it any wonder why a lot of people are so jaded. Those that refuse to take anything at it's face. I rarely believe anything I hear and only a fraction of what I see.

Interesting post I had wondered how they reached their decisions and now, unfortunately I know.

Slightly off topic I read my personal credit rating and was quite amused by the incorrect information and obvious items it had left out. Perhaps the financial industry's infrastructure is becoming as crumbling as this country's infrastructure is.

reply to post by GrantedBail


Well one way or another,
We are getting Transparency.
Maybe not in the preconceived methods that most people understand,
but transparency all the same.

The "Greed Heads" never seem to grow up. Do they?

Great Source by the way! S&F