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USA Edition | Today Is Monday, March 22, 2010 |
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USA Edition | Today Is Monday, March 22, 2010 |
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| Dick Cheney — Citizen, Advocate, Responsible Adult | « Scan Content In The Order It Was Published » | Profitibility Central To Journalistic Integrity | |
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Wall Street Bankers And Their Accomplices Remain Unchecked And Unpunished
But her resignation comes after S&P’s and Moody’s Investors Service were sharply criticised for fuelling the current crisis by failing to downgrade risky bonds backed by loans to borrowers with poor credit until July, when some had already lost more than 50 cents on the dollar.
David Litterick
Telegraph, UK
Time Magazine’s Blameworthy 25
- Angelo Mozilo
- Phil Gramm
- Alan Greenspan
- Chris Cox
- American Consumers
- Hank Paulson
- Joe Cassano
- Ian McCarthy
- Frank Raines
- Kathleen Corbet
- Dick Fuld
- Marion and Herb Sandler
- Bill Clinton
- George W. Bush
- Stan O’Neal
- Wen Jiabao
- David Lereah
- John Devaney
- Bernie Madoff
- Lew Ranieri
- Burton Jablin
- Fred Goodwin
- Sandy Weill
- David Oddsson
- Jimmy Cayne
In September 2007, Kathleen Corbet abruptly stepped down as president of McGraw Hill’s Standard And Poor’s ratings service. Corbet was only 47 years old at the time, but the reason given for her departure was that she wanted to pursue other opportunities — corporate jargon meant to obscure what’s really happening. Being in the eye of the developing storm may have cost Ms. Corbet her job, and, as some have speculated, her departure may have been intended to obfuscate very real problems. [ Ms. Corbet later was identified by Time Magazine as one of the 25 persons responsible for the collapse in world finance and banking ].
Those problems were not about to go away, for the storm that would eventually take down the world wide banking and finance was about far more than failed banks and securities dealers. For at the heart of the developing storm that fall was system corruption, greed and incompetence the scale of which had never before existed.
For the rating services, Standard and Poor’s, Moody’s and Fitch, the developing controversy had a very nasty taste for the world was about to learn that the companies paid handsomely to independently evaluate the quality and risk of securities had evolved into marketing companies that openly and creatively sold their credibility and reputations for cash. The result of what can be described as massive fraud that rated junk quality investments as AAA quality, directly led to the collapse of banks, brokerages, bond dealers, underwriters and insurance companies.
AIG was doomed, but did not yet know how certain its fate was to be, Fannie Mae and Freddy Mac were leveraged the wrong way. CitiGroup was effectively bankrupt, and some big name banks soon to follow as Wachovia, IndyMac and eventually Merrill Lynch reported that their debt holdings, purchased in part on the AAA ratings assign them by corrupted ratings agencies. On the Sunday Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke decided to let Lehman Brothers fail, the storm that drove Kathleen Corbet to resign, was running at full gale force. No large financial institution would go unharmed. Trillions of dollars would be lost by investors world-wide. Millions of Americans would lose their homes while millions more would soon be unemployed, their savings gone and their hopes dashed.
In early 2008, the financial community was in turmoil. It was no longer a secret that the organizations responsible for appraising the credit worthiness of highly risky securities had become so corrupted that their opinions were outright fraudulent. One financial market publication, Naked Capitalism, had long been talking about what S&P, Moody’s and Fitch had done when they began to assign AAA ratings for lucrative ratings fees, in place of documented security credit worthiness.
The real problem that the agencies are paid by the very organizations they rate, and as long as this conflict remains, all other measures are mere window-dressing. The creation of an ombudsman role is an inadequate, unrealistic remedy for a problematic payment structure.
Yet the ratings agency appears to believe this approach will work. In the Wall Street Journal, Deven Sharma, S&P’s president said, “By increasing transparency, we can increase the confidence in the credit market.”
If S&P really believes a few organizational tweaks will save their reputation and along with it, the debt markets, their judgment is badly impaired. This statement is simultaneously woefully misguided and grandiose.Yves Smith
Naked Capitalism — February 7, 2008
Dont Miss . . .
- Time Magazine’s 25 Blameworthy: The Full List
- Complex Documents Obscure Self Dealing: S&P Strcutured Finance
- Naked Capitalism: Naked Capitalism Website
- Telegraph, UK, David Litterick: September 1, 2007
- Kathleen Corbet: On Time Magazine’s Blameworthy List
Ask yourself what major media were reporting on this story, or wonder at why one of the principal causes of worldwide financial turmoil is not being covered. Absent mainstream media going after what may be the most massive financial swindle, sell out, or obscuration in history few will know, or understand that S&P, Moody’s and Fitch did wrong while maintaining the appearance of seriousness and probity. We congratulate Naked Capitalism for its aggressive coverage of what appears to have been long term criminal conduct by and among those entrusted with evaluating and understanding securities risks and opportunities.
We don’t know who were the instruments of their fraudulent ratings, or whether there are ongoing investigations within the Department of Justice, or SEC action in the offing.
For the moment, all we know is that the firms have effectively said that they’re sorry and that they promise not to lie, cheat and steal in the future.
Is It Enough To Say I’m Sorry When You’ve Severely Damaged Billions Of People?
