Yeah, I knew you could; no wonder this economy is so fucked up!
As a companion piece, read: Ron Paul Revolution Excerpts: Money
"Probe of credit raters uncovers violations" by Bloomberg News | July 8, 2008
WASHINGTON - A Securities and Exchange Commission investigation into credit-rating companies found the firms improperly managed conflicts of interest and violated internal procedures in granting top rankings to mortgage bonds.
"The public will see that there have been significant problems," SEC chairman Christopher Cox said yesterday. "There have been instances in which there were people both pitching the business, debating the fees, and were involved in the analytical side."
Pension and money-market funds bought AAA-rated securities backed by mortgages made to the riskiest borrowers because the instruments offered higher returns than government bonds with the same ratings. In many cases, credit raters were paid by the investment banks selling the bonds, prompting regulators and lawmakers to question their independence.
Credit raters were "deluged with requests" for ratings, leading to lapses, Cox said. "The volume of work taxed the staffs in ways that caused them to cut corners, that caused them to deviate from their models."
The SEC may release its findings as soon as this week, Cox said. The agency has been reviewing practices at firms such as Moody's Investors Service, Standard & Poor's, and Fitch Ratings since September.
SEC spokesman John Nester declined to comment on whether any findings were referred to its enforcement division, which investigates and prosecutes wrongdoing. Examination reports don't typically describe findings at specific firms, he said.
S&P spokesman Edward Sweeney, Fitch spokesman David Weinfurter, and Moody's spokesman Anthony Mirenda declined to comment.
Moody's said July 1 that an independent review found some employees violated internal rules when considering whether to downgrade debt securities whose ratings had previously been based on an error in its computer model. The inquiry found employees didn't change methodology to mask the error, it said. People involved may be subjected to disciplinary proceedings that include termination.
The SEC already has proposed a list of rules and other changes affecting credit ratings.
Last month, the agency acted to reduce investment firms' reliance on ratings by saying it may stop requiring money-market funds buy short-term debt carrying a high ranking.--MORE--"
Update:
Banks To Lose $1.6 Trillion
"According to an article in Sonntags Zeitung, the banks are only a quarter of their way through announcing their losses."
Citi: Banks Will Have $5 Trillion Restored to Balance Sheets
"Accounting changes expected to take effect by 2009 will add $5 trillion to the balance sheets of banks and other U.S. financial institutions, says Citigroup's head of global credit strategy Matt King."
"In other words, we can't fix the economy, so we'll cook the books!" -- Mike Rivero of whatreallyhappened.com
