Somebody is finally doing something about those corrupt, self-serving companies that we all rely on to tell us just how risky this stupid bond is. Ohio is suing the ratings agencies.
With the Feds spitting the bit on regulating an industry that never saw a mortgage-backed security or collateralized debt obligation it didn’t want to give a triple-A rating and that showed the most remarkable propensity for figuring things out right after the credit markets imploded, Richard Cordray, attorney general of the Buckeye State, is following the Andy Cuomo’s lead and attacking Fitch Ratings, Moody’s Investors Service and Standard & Poor’s.
But where the N.Y.A.G. struck a deal, agreeing to end his probe if the agencies changed the way they made money from their MBS ratings, Cordray is suing, alleging that the all-powerful trio publishes “false and misleading ratings.”
Specifically, Cordray, like Cuomo, is pissed about its MBS ratings, which he says cost five state pension plans more than $457 million. Of course, Ohio’s pension plans aren’t exactly a model of propriety, which should make for some entertaining “You’re incompetent,” “No, you’re incompetent” exchanges on the stand should this mess ever reach a courtroom. Which is doubtful. Because there’s nothing the all-mighty ratings agency likes less than having its integrity–yes, it still thinks it has some–called into question.
Ohio attorney general sues rating agencies [Reuters]
Breaking news: Ohio’s GO rating cut to triple hook.
Without defending the rating factories, I find it extremely amusing how the “Masters of the Universe” (the Wall St. Bankers) like to have it both ways with the agencies.
When The Masters are putting their deals together, they keep bouncing them from one agency to the other, to see who will accept the weakest structure. If they don’t get the AAA they want, they simply go across the street to the other rating agency, to see what the weakest deal structure will still result in a AAA. And of course, the agencies that come out under AAA are ridiculed as stupid and out of touch, by the Masters, while the ones who were willing to assign the AAA were smart.
Then, when the AAA deals blow up, the rating factory that assigned the AAA quickly flips from smart to stupid.
Of course, the rating factories deserve to be exactly in the hot seat that they are in now, due to their short-sightedness and adandoning their independence. Because they wanted to drink from the punch bowl too.
That second paragraph, er setence, is just tits!
-Greg Michaels
@2 – you what you’re saying is that a salesman checks out the reports on his product and engages the reporting agency willing to give him the best report, huh? That’s startling.
Next thing you know people will start putting references on their resumes that they KNOW will give them good reviews if called. And THEN what will this world come to?
@5:
So, you disagree with me that the Masters want to have it both ways?
Futhermore, the fact that the rating agencies act as quasi-governmental agencies, with ratings requirements baked into everything from bank and insurance capital adequacy models to state and local investment statutes makes it just a bit different from your resume/reference analogy, no??
The big problem pfluger, is the government-mandate for the NRSRO’s, and that almost every institutional pool charter (etc) relies on their ratings.
I have less of an issue with the conflict of interest than that so many people rely on the ratings instead of doing their own diligence, and then cry “foul!” when their lethargy comes back to bite them in the ass
@ analyst: From one analyst to another, I completely concur. Blind reliance on the rating agencies is a fool’s mission. On the other hand, many smaller asset management shops, and some mom’s and pops do just that.
Further, I think the politicians, in their populist zeal do not understand the “ratings shopping” game that the bankers play every day. I believe the “competition” that some of them are proposing(creating even more rating factories) will only encourage even more rating shopping.
populist zeal makes for pretentious blog postings
You might be interested in the unofficial ratings I did the last couple of days because I too am finding out that the ratings companies have sold their soul to the highest bidder rather then be totally unbiased.
http://keepamericaatwork.com/?cat=140
By the way, if you want an honest, accurate, unbiased evaluation of the stocks, I am available for a slight fee at:
http://keepamericaatwork.com/?p=5185
If interested, my contact info is on the “contact me” page.
Want samples of my work, take a look at the categories on wages, stocks, etc. that have red text on the right hand side of the screen.
Regards,
Virgil
http://www.KeepAmericaAtWork.com
Ah, alas, the more things change, the more they’ll stay the same…
They have lots of cows in Ohio, so they must be good at structuring.