S&P caved in to ratings pressure from Goldman Sachs and UBS

[Rage for Order]

In light of S&P's recent warning about the US debt and a possible downgrade of our credit rating, I wanted to be sure that this report that came out last week does not go overlooked. Why should anyone believe a word these people say? Who is paying for their "analysis" this time?

http://www.bloomberg.com/news/2011-04-13/moody-s-s-p-caved-to-mortgage-pressure-by-goldman-ubs-levin-report-says.html

Moody’s Investors Service and Standard & Poor’s adjusted the way they graded securities after Goldman Sachs Group Inc., UBS AG and at least six more banks pressured them, according to a U.S. Senate report.

The world’s two largest bond-ranking companies, both based in New York, made exceptions to rules when bankers asked for better safety ratings on complex mortgage-backed securities, the Senate Permanent Subcommittee on Investigations said yesterday. When Moody’s and S&P changed their assessments of hundreds of those bonds in July 2007, it helped trigger the financial crisis, the panel said.

"The ratings agencies weakened their standards as each competed to provide the most favorable rating to win business and greater market share,” according to the report. “The result was a race to the bottom.”

Relying on mathematical models, Moody’s and S&P awarded AAA ratings to mortgage securities packaged during the five-year housing boom, deeming them as safe as government bonds. About 90 percent of AAA securities backed by subprime mortgages from 2006 and 2007 were later downgraded to junk status, Levin’s committee said.

S&P Rejects Responsibility

Lower ratings “reflected the unprecedented deterioration in credit quality, but were not a cause of it,” Catherine Mathis, an S&P spokeswoman, said in an e-mail response to Levin’s findings. “We regret that, like many others, we did not foresee the speed and extent of the housing downturn, which was the steepest decline since the Great Depression.”

[cyberpj]

1. I heard that yesterday and thought the exact same thing. These 'players' have too much power!

Is there no one they answer to or report to regarding moves like this?

[liberalla]

2. K&R

Very good reminder.

[DCKit]

3. A large number of armchair economists here on DU saw it coming.

It's a pity the "professionals" were blinded by $$$$ and position.

[indepat]

4. Poor Ms. Mathis doesn't see the part racketeering played in the housing downturn, i.e., who would'a

thunk it? :patriot:

[lumberjack_jeff]

5. No one understands complex modern securities.

Including S&P.

Instead of calling them "innovative" and "complex" - and just trusting the inventor that they're magically delicious, it's safer to assume that they're valueless.

[loudsue]

7. Sorry, Jeff, but that is only what these weasels would have you believe. They DO understand them.

Can you really even begin to believe they DON'T?? They INVENTED these securities. Of course they know exactly how they work. It makes me so angry that wall street has actually CONVINCED congress and the public that these things are so mysterious that they just invented themselves, and magically suck funds out of people's hands. Hell! They even magically suck funds out of the hands of the most brilliant financial minds of the entire world.

Pretty magical, wouldn't you agree?

[lumberjack_jeff]

8. They understand that they can legally sell 'em. That's all they want to know. n/t

[xchrom]

6. Gasp! Quell surprise! Nt

[Rage for Order]

9. Kick for the evening crowd

:kick:

[Octafish]

10. S&P will do or say anything for a buck.

Great people. Great company. Great racket.

[Bake]

11. Ratings are meaningless.

They simply prop up the illusion that the markets are transparent. In fact, Moody's, S&P, et al., are simply the same class of whore as the rest of Wall Street. Independent analysis and objective ratings? Hardly. Read some of the transcripts of the FCIC proceedings -- they were in bed with the banksters. Their "stamp" means nothing.

Bake