The real people at fault for this mess: The Ratings Agencies

M

midniteeuropa

the moodies, the standard poors, the fitch, etc...

Banks and institutions cannot invest in anything but the best rated securities (ie AAA).

AIG cannot insure nothing but the best securities (ie. AAA).

It's these agencies who sold themselves to the special interests, and started labeling junk securities with AAA ratings.
 
Exactly! I'm not sure that the banks, RE people, and all else involved as a whole did anything illegal. The ratings agencies, though, what they did is outright fraud. How they continue to operate is beyond me.

Did you see the 'House of Cards' special by CNBC? They interview a lady who worked for Moody's or S&P's who pretty much admits that they knew they were passing off junk as AAA. She should have been interviewed from a jail cell.
 
Quote from Brabed:

Exactly! I'm not sure that the banks, RE people, and all else involved as a whole did anything illegal. The ratings agencies, though, what they did is outright fraud. How they continue to operate is beyond me.

Did you see the 'House of Cards' special by CNBC? They interview a lady who worked for Moody's or S&P's who pretty much admits that they knew they were passing off junk as AAA. She should have been interviewed from a jail cell.
More...

I believe an internal memo slipped out one of these agencies a few months ago that went pretty much as this:

"Let's hope we are all rich and retired before this house of cards comes falling appart."
 
Anybody could have done due diligence and bypassed the ratings agencies. I have thought for a long time that there is no intelligent life inside the walls of a bank, I think I am correct in that assumption.
 
I also have been saying this for sometime. It doesnt make sense.

A bank can only legal do something if a private institution says it can...ie slaps a AAA rating on something.

It seems to me that when you have a profit that is dependent on a ruling by a private entity, eventually the private entity will be bribed, convinced or coerced to doing the unethical route. Enron/Arther Anderson is the first example that comes to mind.

Think about it, would you rather have the FDA telling you what drugs are safe or a private corporation, with little accountability if they wrong and dependent on the payment from big pharma? I mean the first option sucks, but the second one swallows.


Decent rating agencies would have only stalled the problem, banks that were allowed to lever 50-1 were eventually going to fail.
 
no, the banks are the culprits

certainly there was collusion by the rating agencies as they wanted their
hundreds of thousands in fees, but if one didn't 'cooperate' the banks simply
went to the next agency
the banks also changed what they originally presented to the raters in order
and when necessary to meet and obtain the raters approval

the products the banks sold were the banks alone, they tranched the best
for themselves and sold the crap, and they will have to pay eventually —
or the taxpayer
 
I'm sure it's the rating agencies who lobbied for all the deregulations. Please. They are one part of the problem, we have a tendency to want a simple explanation but here there are many culprits.
 
Quote from Wallace:

no, the banks are the culprits

certainly there was collusion by the rating agencies as they wanted their
hundreds of thousands in fees, but if one didn't 'cooperate' the banks simply
went to the next agency
the banks also changed what they originally presented to the raters in order
and when necessary to meet and obtain the raters approval

the products the banks sold were the banks alone, they tranched the best
for themselves and sold the crap, and they will have to pay eventually —
or the taxpayer
More...

that's a completely wrong understanding of the rating process for structured credit.
by the way banks quite often kept the crap...

agree with OP that rating agencies are the main culprit in hiding the real quality of the paper sold - they betrayed the sole reason of their existence. they effectivelly even told banks how the deals should be structured by providing (monte carlo) rating models.
but of course everybody played their part: banks, government, sec, fed, consumers, chinese, your pick...
 
Quote from midniteeuropa:

the moodies, the standard poors, the fitch, etc...

Banks and institutions cannot invest in anything but the best rated securities (ie AAA).

AIG cannot insure nothing but the best securities (ie. AAA).

It's these agencies who sold themselves to the special interests, and started labeling junk securities with AAA ratings.
More...

actually Banks can and do buy securities that are not AAA.
Banks and Brokerages also rate ie Goldman, BOA, City even still will up or down grade a stock. If they wish to purchase less than x quality there are always subsidiaries or branches or funds under their umbrella that will allow this while maintaining compliance.

They are all at fault including us (in general) when we as individuals purchase homes or assests on credit outside of our gross income.
Lots of blame but when appraisals and gov't. sponsored programs allow a person to buy a home with no money down and will even pay for the legals etc with the new owner having no sweat equity we are all looking for a disaster.
Banks and Brokers are legalized theives and you can thank your government for that where it is illegal to have x no. of dollars, you have to put your money in the bank or face IRS or Rico, money laundering where by the Banks charge us to us our money, can lend it out leveraged with no recourse and guess what the gov't. only guarantees the funds to x.

You are way to deep inside the forest to see all the trees.
The reason Banks are Gov't work hand in hand is for one purpose and that it to know how much you have a to find a way to take it. Taxes.

I may pay 5-7 dollars for product you pay a dollar or two for but I have to answer to NO one vs my money.
My tax is when I purchase product period.

w
 
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