Ratings Agencies Under Fire


Lawmakers spent much of the day trying to sort through the aftermath of the Wall Street crisis. They’re trying to better understand how credit agencies contributed to the mess.

Many market watchers including our own Dylan Ratigan feel adamantly that Moody's, Standard & Poor's, and Fitch are largely to blame for failing to flag problems as well as giving triple A ratings to securities which were anything but triple A.

The rating agencies themselves acknowledged some responsibility. "We did not anticipate the magnitude and speed of the deterioration,” said Moody's said in prepared remarks.

However opponents say that’s the tip of the iceberg. In today's hearing before the House Oversight Committee, the credit rating agencies looked more like profit-hungry institutions that would give any deal their blessing for the right price, reports CNBC’s Scott Cohn.

Here's an example from the testimony. This is an instant message exchange between two unidentified S&P officials about a mortgage backed security deal on 4/5/2007:

Official #1: Btw that deal is ridiculous.

Official #2: I know right...model def does not capture half the risk.

Official #1: We should not be rating it.

Official #2: We rate every deal. It could be structured by cows and we would rate it.

Also from the testimony, here's a note from an S&P employee that says, "Let's hope we are all wealthy and retired by the time this house of cards falters."

The ratings agencies betrayed our trust, says an irate Jon Najarian on CNBC’s Closing Bell. In order to amend the broken trust we need to get some skins on the wall.

The revelations from the hearings sent the Dow tumbling well over 500 points. And believe it or not, that could be the good news. With the Dow selling off significantly Jon Najarian sees opportunity. I bought SanDisk below $10 and am selling calls against it to cushion downside.

As for the ratings agencies, we'll be watching.

Following is video from a similar conversation between Jon Najarian and Dylan Ratigan on "Fast Money."

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