How Moody's sold its ratings - and sold out investors
By Kevin G. Hall | McClatchy Newspapers
WASHINGTON -- As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.
A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.
Instead, Moody's promoted executives who headed its "structured finance"
division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now:
"toxic assets."
As Congress tackles the broadest proposed overhaul of financial regulation since the 1930s, however, lawmakers still aren't fully aware of what went wrong at the bond rating agencies, and so they may fail to address misaligned incentives such as granting stock options to mid-level employees, which can be an incentive to issue positive ratings rather than honest ones.
The Securities and Exchange Commission issued a blistering report on how profit motives had undermined the integrity of ratings at Moody's and its main competitors, Fitch Ratings and Standard & Poor's, in July 2008, but the full extent of Moody's internal strife never has been publicly revealed.
WOW!....that’s quite the read about ‘Moody’s.....
...So they’ve been taking (bribes) for ratings. I’m not surprised as so many agencies at all levels ‘Pay to Play’. Interesting ‘Warren Buffet’ had his hands in this as well.
Just another agency rolling in the dough....and to think they fired people for wanting to do the right thing!
” Instead, Moody’s promoted executives who headed its “structured finance”
division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now:
“toxic assets.”
I didn’t know Moody’s was involved in this . They have no cred as far as I’m conserned.