Rating Agencies Were Partners in the Chain of Deception
New York Attorney General Andrew Cuomo seems to be trying to clean up old business before departing for a run at the Governor’s office, but his latest investigationinto the ratings agencies seems not only strangely timed, but strange in approach.
I’ll be the first to tell you (and did in my book many times) that the ratings agencies— Standard & Poor's, Fitch Ratings and Moody's Investment Service—were a key part of the chain of deception that led our financial markets to near ruin.
But that story has been well documented, not only by me, but also by none other than the House Committee on Government Oversight and Reform.
I think it’s been a true shame the ratings agencies have thus far escaped punishment of some kind for the shoddy nature of their work, but Cuomo’s hope of finding whether they were duped by the investment banks into awarding strong ratings to a slew of slimy structured products seems an odd road to go down.
How does one define “duped”. The bankers were smarter than the people they dealt with at the ratings agencies. Those bankers developed structured products with a great deal of input from the ratings agencies that were designed to meet their criteria for investment grade ratings.
There was a complete dereliction of duty on the part of the rating agencies in applying common sense to the products they were being asked to rate.
But does any of that mean Wall Street firms that are named in the investigation—GoldmanSachs, Morgan Stanley, UBS, Citigroup, Credit Suisse, Deutsche Bank, Credit Agricole and Merrill Lynch, which is now owned by Bank of America—misled them? (See more below stock ticker box.)
Under Investigation
| TICKER | COMPANY | PRICE | CHANGE | %CHANGE |
|---|---|---|---|---|
| -- | -- | -- | -- | -- |
| SC0Y-DE | Invesco STOXX Europe 600 Optimised Insurance UCITS ETF | 169.10 | +0.80 | +0.48% |
| ATC-PL | -- | -- | -- | -- |
| -- | -- | -- | -- | -- |
| DBK-DE | Deutsche Bank AG | 15.72 | +0.18 | +1.14% |
| GS | Goldman Sachs Group Inc | 461.18 | +3.03 | +0.66% |
| MI9T-HA | -- | -- | -- | -- |
I think they knew exactly what they were doing!
I don’t have subpoena power and so one never knows what Cuomo will find, but it’s far from clear to me how you can dupe someone when they’re your partners in deception.
Related News:
- Committee on Oversight and Government Reform
- Prosecutors Ask if 8 Banks Duped Rating Agencies
- Rating Agency Data Aided Walll Street in Deals
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