There was a lot of perverse behavior on Wall
Street leading up to the financial collapse. Among the worst was
rating agencies slapping triple-A ratings on junk bonds. Many have
argued that big investment firms such as Goldman Sachs and Deutsche Bank
conned rating agencies into inflating the value of mortgage-backed securities. Now New York
Attorney General Andrew Cuomo is investigating
eight banks for that very reason.
- This Is Big, writes Yves Smith at Naked Capitalism: "The
Cuomo investigation is honing in on a crucial issue: did the banks
misrepresent the assets in the deals rated? That has the potential to be
a Big Deal, since it could result in bad ratings and the resulting
losses being attributed to bad information from banks, who could be
sued, and conveniently also are deep pockets."
- This Is About
the Thin Line Between Clever and Criminal, writes Joe Weisenthal at Business
Insider: "If there's a clear pattern of providing improper data to the
raters...then the banks begin to look like they were specifically trying
to deceive customers on behalf of their own trading desks or special
clients (like John Paulson). Suddenly, this looks less like hedging or
market making, and more like putting your finger on the scale."
Is Just Playing Politics Here, writes Felix Salmon at Reuters: " I think
we’ve probably moved beyond the point at which it’s important how strong
these cases are. All that Cuomo needs to do is tell Story about his
investigation and most of the damage is already done: he never needs to
bring an actual case, and in fact, given the amount of time it takes to
put such cases together, he’ll probably have moved on to grander elected
office by then anyway."
- Rating Agencies Were at the Heart of the Crisis, writes
Nancy Miller at True/Slant: "The
rating agencies served as the handmaidens to Wall Street firms slapping
triple-A ratings on mortgage-based derivative deals faster than you can
shout, 'Next!' Imprimaturs from Standard & Poor’s and Moody’s (major
stakeholder: Warren Buffett) enabled many municipalities and pensions
seeking top-rated investments to buy collateralized debt obligations
(CDOs) that later turned out to be drek."
- Everyone's at
Fault, writes analysts at Piper Jaffray, an investment banking firm: "While we believe the rating agencies share culpability
for the errors that triggered the financial crises, we also think that
banks, regulators, Congress, borrowers and investors all played leading
Want to add to this story? Let us know in comments
or send an email to the author at
jhudson at theatlantic dot com.
You can share ideas for stories on the Open Wire.