S&P rated deal 'structured by cows' according to SEC report

Posted Aug 2nd 2008 2:40PM by Zac Bissonnette
Filed under: Law, Scandals, McGraw-Hill Companies (MHP)

The Wall Street Journal (subscription required) has obtained a draft version of the SEC's report on bond-rating firms and their role in the credit bubble, and some of the stuff is pretty scary.

In one e-mail, a staffer at Standard & Poor's, which is own by McGraw-Hill (NYSE: MHP) told another that "we rate every deal," and that "it could be structured by cows and we would rate it."

Another wrote that "rating agencies continue to create" an "even bigger monster -- the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters. ;O)"

Yes -- complete with the smiley face. If this seems reminiscent of disgraced analyst Henry Blodget's e-mails bashing stocks he was publicly pumping during the dot-com bubble, that's because it's exactly the same. The lesson here, once again, is this: e-mails ever really get deleted permanently and, if you're being shady or doing something unethical, make a phone call, talk with the person in a dark alley, or send them a letter that they can promptly discard. Don't send an e-mail!

Of course, S&P's investment-grade ratings on CDOs stuffed with dodgy loans turned out to be wildly optimistic, and the house of cards has done more than falter -- it's brought down Bear Stearns and wreaked havoc on the economy.

Tags: Bear Stearns, bond rating, BSC, CDOs, e-mail, Henry Blodget, inthenews, McGraw-Hill, MHP, ratings agencies, SEC, SP

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Reader Comments (Page 1 of 1)

8-02-2008 @ 3:40PM

john stark said...

"The lesson here, once again, is this: e-mails (n)ever really get deleted permanently and, if you're being shady or doing something unethical, make a phone call, talk with the person in a dark alley, or send them a letter that they can promptly discard. Don't send an e-mail!"

I suppose that is the lesson for those of you who work on Wall Street. For the rest of us, the lesson here, once again, is this: We can't trust you.

8-06-2008 @ 1:44PM

thmedawar said...

Sad to say; I am utterly disgusted with the indifference these, over paid, narcissistic, financial institutions, banks, rating agencies and congressional ditherers have chosen to trash our economy for the sake of making a buck or getting a vote! When did economic prudence get replaced with predatory profiteering?

Real lives are hurt by the cavalier, minimal due diligence; everything is for sale, throw the bill to the taxpayer, nickel-and-dime the consumer mentality being nurtured by a few misguided questionable leaders in the congress, financial community and their sycophantic followers.

Our country, our treasure, our liberty, our honor, our future is not for sale at any price. We all need to consider the impact and consequences of our actions. Like it or note the world is more interconnected than ever before and the world is looking for America to behave in a manor commensurate with the responsibility of global leaders.

I believe our citizens need to ratchet back their spending, appreciate the values of our society and our country, look for quality not quantity, save more, hold congress, Wall Street and the banking industry accountable, and learn to build for the long term not the short term. We all need to step back and think -- how can we start rebuilding and preparing for a future we are proud of?

We are on a path which will craft the future of the generations to come - its time to ask what legacy we want to leave.

8-03-2008 @ 7:07AM

al coholic said...

If we could read the e-mails of all corporate executives and politicians we would become so disenchanted that books by Carl Marx might become best sellers.

Big money corrupts nearly everyone whom it touches. Surely there is a better way to run a world.

8-04-2008 @ 6:00AM

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