The Last Mystery of the Financial Crisis
Last edited Fri Jun 21, 2013, 04:24 PM - Edit history (1)
EDIT: DU'er TakeALeftTurn previously posted this in GD.
http://www.democraticunderground.com/10023059638
Source:
By Matt Taibbi
June 19, 2013 9:00 AM ET
Rolling Stone "Politics"
What about the ratings agencies?
That's what "they" always say about the financial crisis and the teeming rat's nest of corruption it left behind. Everybody else got plenty of blame: the greed-fattened banks, the sleeping regulators, the unscrupulous mortgage hucksters like spray-tanned Countrywide ex-CEO Angelo Mozilo.
But what about the ratings agencies? Isn't it true that almost none of the fraud that's swallowed Wall Street in the past decade could have taken place without companies like Moody's and Standard & Poor's rubber-stamping it? Aren't they guilty, too?
Read more: http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619#ixzz2WsRymOlz
Long article, 4 pages.
EDITED TO ADD: As DU'er "hollysmom" noted, we've all been pretty well aware of the role of bogus ratings in the whole financial debacle. Taibbi notes that public awareness in his piece, and writes on the further clarification rendered by documents collected for a lawsuit:
Thanks to these documents, we now know how that happened.
Read more: http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619#ixzz2WsXzIuKA
hollysmom
(5,946 posts)put them in jail or reveal them for the frauds to all
Adsos Letter
(19,459 posts)I was interested in his discussion of the documents.
I also doubt it will be the "last mystery" to come out of this whole mess.
Warpy
(111,417 posts)with his cronies. Look how long it took them to do anything about Madoff, and that whole case was tied up with a pretty ribbon and dropped right into their laps--repeatedly.
People at the SEC should go to prison along with the honchos at Moody's and S&P. If any of them had done their jobs properly, the mess would never have happened.
longship
(40,416 posts)From 2010, Michael Lewis delved into this matter.
Of course, the ratings agencies were complicit. They were being paid by the very same Wall Street Banks whose toxic products they were rating.
How else could have turned out?
When a bunch of low rated mortgage bonds are duplicated via Credit Default Swaps (CDS) and then bundled into new bonds, the ratings agencies looked at them as a whole new deal, instead of what they were, rebundled bonds from a previous lower tranch. In other words, the worst of the worst. But the synthetic Collateralized Debt Obligation (CDO) hid all of that from view.
Here's a conversation with a Moody's employee as related in Lewis's book:
Here's what I don't understand, said Vinny, hand on chin. You have two bonds that seem identical. How is one of them triple-A and the other not?
I'm not the one who makes those decisions, said the woman from Moody's, but she was clearly uneasy.
Here's another thing I don't understand, said Vinny. How could you rate any portion of a bond made up exclusively of subprime mortgages triple-A?
That's a good question.
Bingo.
A very highly recommended read. Michael Lewis lays it all bare in a very entertaining yet informative narrative from the perspective of some very smart people who saw what was really happening and bet against it.
The Big Short: Inside the Doomsday Machine. By Michael Lewis
You'll learn how the Wall Street banks screwed the world.
Adsos Letter
(19,459 posts)I knew about CDO's, CDS', and tranches (which is only to say that I got my understanding from the news and internet) but I've not read the actors in their own words. I'll want to make sure my blood pressure meds have been refilled before I do.
Have you seen the FRONTLINE report on Brooksley Born? It's called "The Warning." If you've not, I'd recommend it. If they had listened to her this whole disaster could have been avoided (maybe). Here's the link.
http://www.pbs.org/wgbh/pages/frontline/warning/view/