Update1: Twitter response: #StandardandPoorsThroughoutHistory
Update2: Who owns Standard and Poors? McGraw-Hill. Who runs McGraw-Hill? See the Board of Directors, courtesy TheyRule.net, tip @dartdog
- Th Apr 13, 2011: Moody’s, S&P Caved In to Ratings Pressure From Goldman, UBS Over Mortgages – Bloomberg
- Fri Apr 14, 2011: Moody’s, S&P Triggered Financial Crisis, Congressional Report Finds – Reuters
- Mon Apr 18, 2011: S&P threatens to cut U.S. credit rating on deficit – Reuters
- Mon Apr 18, 2011: S&P’s Negative Call Stems From Crisis That Some Say It Caused – CNBC
From the Senate report, WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse (pdf):
Moody’s Investors Service, Inc. (Moody’s) and Standard & Poor’s Financial Services LLC (S&P), the two largest credit rating agencies (CRAs) in the United States, issued the AAA ratings that made residential mortgage backed securities (RMBS) and collateralized debt obligations (CDOs) seem like safe investments, helped build an active market for those securities, and then, beginning in July 2007, downgraded the vast majority of those AAA ratings to junk status.953 The July mass downgrades sent the value of mortgage related securities plummeting, precipitated the collapse of the RMBS and CDO secondary markets, and perhaps more than any other single event triggered the financial crisis.
Between 2004 and 2007, taking in increasing revenue from Wall Street firms, Moody’s and S&P issued investment grade credit ratings for the vast majority of the RMBS and CDO securities issued in the United States, deeming them safe investments even though many relied on subprime and other high risk home loans. In late 2006, high risk mortgages began to go delinquent at an alarming rate. Despite signs of a deteriorating mortgage market, Moody’s and S&P continued for six months to issue investment grade ratings for numerous subprime RMBS and CDO securities.
Any thoughts about payback?
Added: 10.57 pm : Robert Reich
Until the eve of the collapse S&P gave triple-A ratings to some of the Street’s riskiest packages of mortgage-backed securities and collateralized debt obligations.
Had S&P done its job and warned investors how much risk Wall Street was taking on, the housing and debt bubbles wouldn’t have become so large – and their bursts wouldn’t have brought down much of the economy. You and I and other taxpayers wouldn’t have had to bail out Wall Street; millions of Americans would now be working now instead of collecting unemployment insurance; the government wouldn’t have had to inject the economy with a massive stimulus to save millions of other jobs; and far more tax revenue would now be pouring into the Treasury from individuals and businesses doing better than they are now.
In other words, had Standard & Poor’s done its job over the last decade, today’s budget deficit would be far smaller and the nation’s future debt wouldn’t look so menacing.
We’d all be better off had S&P done the the job it was supposed to do, then. We’ve paid a hefty price for its nonfeasance.
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