• News
  • Celebrities
  • Finance
  • Crypto
  • Travel
  • Entertainment
  • Health
  • Others

Congress Saves Best for Blasting Rating Agencies

At the end of a five-hour excoriation of CEOs at credit-rating agencies, Rep. Chris Shays (R-Conn.) said to the heads of Moody’s, Standard’s & Poor’s and Fitch: “Remember, we’re speaking from an institution, Congress, with lower ratings than yours.”

Congress doesn’t know what its next step will be in regulating Wall Street after the financial meltdown. But the House Oversight and Government Reform Committee accomplished an authoritative takedown today of the credit ratings agencies. Through documents obtained by the committee and unusually sharp questions from committee members, we learned this:

  • During the housing bubble of 2002-2006, there was virtually no government regulation of the credit-rating agencies. The Securities and Exchange Commission proposed rules in 2002 to monitor them. That’s when bond issuers were securitzing subprime mortgages and collateralized debt obligations at ever increasing rates. By the time Congress finally passed a reform act, it was 2006 and the housing bubble was about to burst.
  • The credit-rating agencies were even more tardy in responding to the housing market collapse than the SEC and Congress. Moody’s CEO Raymond McDaniel continually issued reassurances that the mortgage-backed securities and credit default swaps his firm was rating AAA deserved the rating. Even privately, McDaniel only began to identify the problem in Sept. 2007.

A transcript (pdf) of a Moody’s “town hall” company meeting shows that McDaniel told his employees in September that it was time “to speak as candidly as possible about the subrpime market.” But the discussion mostly centered on “extensive outreach to the media” to disentangle the rating company from the subprime mess.

Just one month later, McDaniel wrote to his board of directors (pdf) that the company’s business model needed to have a “careful postmortem” evaluation.

  • The credit rating agency industry is in tatters. Moody’s has been around for 100 years, but it wasn’t until the late 1970s that the company had to rely on the issuers of bonds for its profits. The obvious conflict of interest– will an issuer come back to a credit-rating agency if the agency unfavorably rates the bond?– finally caught up with the industry in the subprime mortage market.

None of the rating companies developed a credible model to rate mortgage instruments, and there was a race to the bottom to rate risky bundles of subprime loans as AAA.

“In my [Baltimore] district,” said Rep. Elijah Cummings (D-Md.), “students are not able to get loans, businesses are closing and seniors are going back to work. You’ve lost our trust.”

The CEOs didn’t respond to Cummings’ remarks or numerous other accusations that they have lost the public’s trust.

But it was clear that the credibility of an entire financial industry had been destroyed in just five hours.

Discussion & Comments (0)

    Recent Articles

    • Things You Should Know about North America

      Things You Should Know about North America

      Get to know more about North America.

    • Eurovision 2010 Paula Seling Unpredictable Contest

      Eurovision 2010 Paula Seling Unpredictable Contest

      Paula Seling's experience on the Eurovision stage led her to declare that "Eurovision is an unpredictable contest". Which may explain the success of the young Lena from Germany, about whom the predictions before the event did not offer much chances for victory.

    • VIPRow.me - The Best Sports Streaming Website Today

      VIPRow.me - The Best Sports Streaming Website Today

      Have you ever contemplated creating a user-friendly site dedicated to sports-related free live streaming channels?

    • Learn How To Download, Install, And Use The Xnxubd 2022 Frame App

      Learn How To Download, Install, And Use The Xnxubd 2022 Frame App

      XNXUBD 2022 Nvidia users are able to watch thousands of videos and other contents online. XNXUBD 2022 Nvidia New is a piece of software that enables people to watch videos online without having to pay for memberships. On a graphics card, the XNXubd also provides some of the best gaming and virtual reality experiences.

    • Xvideostudio Video Editor Apk Free Download For Pc Full Version In 2022

      Xvideostudio Video Editor Apk Free Download For Pc Full Version In 2022

      A new edition of the Video Editor Apk for xVideostudio.Video Studio has all the latest features, including support for multiple video download formats in HD, FHD, and even 4K resolutions.

    • 9 Best Lotion For Masturbation - Popular Choice For 2022

      9 Best Lotion For Masturbation - Popular Choice For 2022

      Masturbation is a common activity for men and women. It's a natural and risk-free way to explore your body, experience pleasure, and release sexual tension.

    • Reasons Why You Need To Stop Watching Movies From Sflix

      Reasons Why You Need To Stop Watching Movies From Sflix

      Without having to sign up or pay anything, you can watch movies online for free with SFlix. It has more than 10,000 movies and television shows.

    • Coi Leray Mom And Dad's Family History & Wife, Explained

      Coi Leray Mom And Dad's Family History & Wife, Explained

      Coi Leray Collins (born May 11, 1997) is a rapper from the United States. Leray started publishing songs to SoundCloud in 2014, and in 2018 she released her breakthrough track "Huddy" as well as her first mixtape, Everythingcoz.

    • Listen And Download Music On MyFreeMP3 For Free

      Listen And Download Music On MyFreeMP3 For Free

      Are you in a bind and looking for a place to obtain free mp3 songs? Never again will you need to bother, since this article has everything necessary to obtain your solution. Download free music from MyfreeMP3.com, one of the world's most popular websites.