So you're a savvy, cautious investor. You do your research and look for those Standard & Poor's and Moody's ratings. Independent analyses that really let you know you're on solid ground. Yeah. No.
WASHINGTON — A Senate panel investigating the causes of the nation's financial crisis on Thursday unveiled evidence that credit-ratings agencies knowingly gave inflated ratings to complex deals backed by shaky U.S. mortgages in exchange for lucrative fees.
The Senate Permanent Subcommittee on Investigations will hold a detailed hearing on Friday, where its chairman, Sen. Carl Levin, D-Mich., will introduce e-mail records in which executives from Standard & Poor's and Moody's Investors Service acknowledge compromising the integrity of ratings to win business from big Wall Street firms.
"They did it for the big fees they got," Levin told reporters on Thursday after outlining the broad strokes of what he'd pursue Friday when he puts current and former ratings agency officials on the hot seat....
In one example obtained by the committee, Yvonne Fu, a Moody's employee, sent an e-mail to a banker at Merrill Lynch in June 2007, pressuring the investment bank to lock down a big fee in exchange for a positive rating.
"We have spent significant amount of resource on this deal and it will be difficult for us to continue with this process if we do not have an agreement on the fee issue," Fu wrote....
In another bit of explosive evidence, the panel on Friday will release an e-mail from a Standard & Poor's employee acknowledging complicity in building up a doomed market.
"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," the employee wrote on Dec. 15, 2006.
"Let's hope we are all wealthy and retired" before we bring our whole financial system crashing down around our ears. I guess we're just lucky the entire economy hasn't devolved into a barter system. That's where these guys would happily have led us, as long as they got theirs.