Ratings Agencies like Moody's and Standard and Poor can be sued - CNBC's Power Lunch Sept 4, 2009

Charlie Gaparino reporting.

Category:

News & Politics

Tags:

• stock
• market
• DOW
• S&P
• equities
• structured
• products
• MBS
• mortgage
• backed
• securities
• CDO

[phigura153]

"I hope we are all rich and retired by the time this house of

cards comes crashing down."

Sounds like somebody speaking

of a coming recession, depression, or attack on the World

Trade Center. Beware of emotional arguments. Stick to

logic. The revenues of credit ratings agencies increase in

a falling interest rate environment, and decrease in a

rising interest rate environment. Maybe the person who

made those comments was concerned that the Fed was

going to raise rates?

[financialclips]

Here is a quote from CNBC's "House of Cards".

Ann Rutledge rated securities for Moodys.

During the boom, when home prices surged and virtually no borrowers defaulted, she says the riskier Triple-B rated securities made from mortgages looked as good as the safe Triple-A's.

Rutledge: "Eventually the market gets smart and says, let's lower the requirements for Triple-A."

---

(It won't let me post the link, but do a Google search for "house of cards" cnbc and it's the first link, Slide 13.

[financialclips]

Here is the rest of the quote from CNBC's "House of Cards".

The credit rating agencies had an incentive to award a security the best possible ratings.

That's because the agencies were paid for their appraisals by the very banks that issued the securities.

Moody's says it "properly manages the potential for conflicts of interest and has added new safeguards that further address those conflicts."

[financialclips]

Sorry.

It is from Slide 12 of the slideshow, not 13.

[financialclips]

Here is the email from a Moody's employee who doubted the ratings they were giving these financial instruments.

"Let's hope we are all wealthy and retired by the time this house of cards falters,'' one e-mail from an S&P employee said.

-- Bloomberg, Oct 22, 2008

It won't let me post the link, but Google the quote in parentheses and it's the first link.

The title of the article is, "Moody's, S&P Employees Doubted Ratings, E-Mails Say (Update2)".

[phigura153]

If you read the annual reports of Moody's since that company

was spun-off from DNB, you will see from the letters to

shareholders that Moody's understands the importance

of good ratings, and the problems of conflct of interest.

Also, "stupid" advice and opinions (right or wrong) are two

different concepts. Should a patient sue a doctor when he

gives him a "second opinion" that contradicts the "first

opinion"? "Congratulations, your cancer is in remission".

[financialclips]

They also quoted an email, which I think was inside one of the ratings agencies, said something like, "I hope we are all rich and retired by the time this house of cards comes crashing down."

This is essentially admitting that their ratings were bogus.

They also did things like give them a AAA rating, but then buried inside a 300-page legal document, they used weasel words to say, "Well, the AAA we are giving this investment isn't the same as the AAA we give to other investments."

[jpsix]

FUCK MOODY'S BY PORTUGAL

[maanvol]

There is no need for credit rating agencies! Controlling the financial system ought to be the job of central banks! This is one of the reasons why humanity, nature, etc., is -- permanently -- being flagrantly robbed, by thugs!

[nowthatsinteresting1]

Number one priotity to sort out the west's financial crisis - sort out the rating agencies. Tehy are too corrupt to survive. Their piece of crap job on rating products in the last 15 years has cauased the crash. And now they get to tell Greece, UK, US how to organise their economies - all under the threat of increased interest? The lunatics HAVE taken over the asylum.

[moello888]

It´s time to rate the S&P as well as Moody.

[phigura153]

Again, emails can be forged. Emails can also be

misinterpreted. Between now and retired, that can

be a very long time. Moody's revenues are interest

rate sensitive. To stop the US dollar from devaluing

the Fed might raise rates, dramatically. It would be

like a "house of cards falling", for in a rising interest

rate environment, Moody's revenues fall dramatically.

So if that email was from an S&P employee, what did

he mean? Were words taken out of context.

who did he send that email to?

[phigura153]

CNBC's 'House of Cards' looked like propaganda to me.

In the same two weeks "they" have been airing a "9-11

documentary" as if "they" want to implant the image of a

tower of cards falling. Why blame Moody's? Analysts at

Moody's may have been saboteurs ("terrorists") however.

But would those bad analysts not be fired by Moody's?

As it is now, Moody's might become obsolete with the

demise of investment banks, a source of Moody's revenues,

in the US. A level 3 asset is difficult to rate.

[phigura153]

If Rutledge truly was an employee for Moody's, and those

really were her words, that makes no sense. The criteria

for a triple A rating are very stringent. I think there are only

5 (or fewer) INDUSTRIAL companies left in the US that

have a triple A rating. Two of them being Automatic Data

Processing, and Coca-Cola. "The market gets smart, and

says,..." The market does not set the requirements for a

triple-A rating. Your quote is non-sensical: Maybe you

misheard, or misread?