How Moody's sold its ratings - and sold out investors

[DearAbby]

WASHINGTON -- As the housing market collapsed in late 2007, Moody's Investors Service, whose investment ratings were widely trusted, responded by purging analysts and executives who warned of trouble and promoting those who helped Wall Street plunge the country into its worst financial crisis since the Great Depression.

A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.

Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."

As Congress tackles the broadest proposed overhaul of financial regulation since the 1930s, however, lawmakers still aren't fully aware of what went wrong at the bond rating agencies, and so they may fail to address misaligned incentives such as granting stock options to mid-level employees, which can be an incentive to issue positive ratings rather than honest ones.

Read more: http://www.mcclatchydc.com/2009/10/18/77244/how-moodys-sold-its-ratings-and.html#ixzz1DVQiwYaw

[xchrom]

1. i hate these ratings institutions. hate them. nt

[Bake]

2. Just another sign of the moral rot that is Wall Street.

The game is rigged. Maybe it always has been rigged, I don't know ... but it sure as hell is now.

Bake