Analysts at some of the large credit ratings agencies may have had their eyes on the cash register instead of paying attention to the quality of their work. So says the SEC.
According to The Wall Street Journal, "The 10-month examination uncovered poor disclosure practices, a lack of policies and procedures guiding the analysis of mortgage-related debt, and insufficient attention paid to managing conflicts of interests."
That revelation all but buries the already damaged reputations of the ratings firms.
Making money is OK, but the practices may have lost investors billions of dollars. The big credit rating shops like Standard & Poor's have the job of evaluating the risk of products like mortgage-backed securities. Investment banks and their clients thought this paper was fairly safe. It did not turn out that way, not by a long shot.
The revelation opens up the issue of whether the government will sanction the firms or simply increase regulation. Just as important, the report could be used by financial firms and clients who lost money to put the liability for those losses on the companies that let mortgage debt pass for "OK" when it was really very toxic.
S&P and its peers are not out of the woods, and they may be spending a lot of time in court.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
7-09-2008 @ 5:16PM
Lawrence Phoenix said...
Hey, Murray , tell the Mount Rushmore crew to hold up on the Ronald Reagan face.....this deregulation crap ain't workin' out real well....