Raters Ignored Proof of Unsafe Loans, Panel Is Told

[groovedaddy]

As the mortgage market grew frothy in 2006 — leading to a housing bubble that nearly brought down the banking system two years later — ratings agencies charged with assessing risk in mortgage pools dismissed conclusive evidence that many of the loans were dubious, according to testimony given last week to the Financial Crisis Inquiry Commission.

The commission, a bipartisan Congressional panel, has been holding hearings on the origins of the financial crisis. D. Keith Johnson, a former president of Clayton Holdings, a company that analyzed mortgage pools for the Wall Street firms that sold them, told the commission on Thursday that almost half the mortgages Clayton sampled from the beginning of 2006 through June 2007 failed to meet crucial quality benchmarks that banks had promised to investors.

Yet, Clayton found, Wall Street was placing many of the troubled loans into bundles known as mortgage securities.

Mr. Johnson said he took this data to officials at Standard & Poor’s, Fitch Ratings and to the executive team at Moody’s Investors Service.

http://www.nytimes.com/2010/09/27/business/27ratings.html?th&emc=th

[jtuck004]

1. Federal prisons need more people to sweep floors.

Time to start nominating some candidates...

[dixiegrrrrl]

2. The lid is being blown off the entire line of mortgage fraud.

My fear is that the only government response will be attempts to bail out the worthless mortgage bonds.
So far there have been NO prosecutions even when judges have name the behavior "fraud".

[snot]

3. K&R'd