Market Crashes As Credit Rating Firms Make Record Profits
The big three credit rating firms, Moody’s Corporation, Standard & Poor’s and Fitch Ratings’ profits in recent years have been among the fattest on Wall Street. One firm, Moody’s, rang up profit margins three to four times those of Exxon Mobil Corp. while assuring investors that complex mortgage-backed investments were safer bets than they really were, according to Bloomberg News.
In recent financial filings noted by the investor web blog Footnoted.org, however, Moody’s confirmed it had “errors in the model” it used to rate some investments, and is “cooperating with . investigations and inquiries” by “states attorneys general and other governmental authorities,” including the Securities and Exchange Commission.
Two former rating company employees who took issue with their firms’ practices are also slated to testify Wednesday, according to the panel.
A former managing director at Standard & Poor’s who left in 2005, after he says he refused to go along with several clear and questionable acts of corporate corruption.
“They thought they had discovered a machine for making money that would spread the risks so far nobody would ever get hurt,” the executive told a Bloomberg reporter last month.
The other former executive to testify, Jerome Fons, has become an advocate for reforming the rating industry since leaving Moody’s Corp. last year. Fons has pointed out the glaring conflict of interest on which the rating firms are based – they are paid by the firms who will profit if their investment product gets a stellar rating – and has even suggested the lucrative industry should be replaced entirely.
A Securities and Exchange Commission investigation in June found the companies faced conflicts of interest, stemming from the fact that the investment banks trying to sell the mortgage-backed securities were the ones paying the firms to rate their products. Emails uncovered by investigators showed analysts were concerned that negative ratings would hurt their firms’ income.
Federal Debt Relief System believes it’s important that people know the truth so that they can make up their own minds.
See Also Bailout, America’s Debt Revolt
Federal Debt Relief System releasing the hounds! Good work guys bringing to our attention yet another travesty that only Federal Debt Relief System could. I mean these are the guys vacationing in Aspen while the rest of us are at home eating soup out of a can. I just don’t get how corrupt these people can be I mean seriously to blatantly have a conflict of interest on which the rating firms are based is just heinous.
I wish that I could say the idea of creating a non-for-profit agency is genius but in reality it’s just plain common sense which appears to be lacking the higher up you get within a company, organization or governmental/political office. Where are the regulators? Why do we have individuals writing their own rules while we suffer in our day to day lives? It really makes me suspicious about corporate governance, corporate greed, corporate corruption, corporate capitalism and corporate exploitation; seriously the list could go on forever!
I’m glad I have a place to vent and I know Federal Debt Relief System will keep shedding light on this subject and these miserable little weasels!
If any other bloggers want to get more information you can find these guys at on these http://www.fdrs.org
John D. - MA
I’m glad someone like Federal Debt Relief System is on our side. It makes my blood boil when I think of all of the banking fraud and scams that are going on everyday and right under our noses. It’s time someone like Federal Debt Relief System takes a stand against these bullies! The banking elite must think the rest of us are content paying their tab, well not anymore and not on my dime!
As a nation we need to be concerned with credit card reform, the reality of credit card debt and how to get help. That’s what the average American wants and needs considering we’re all guilty of being debt slaves. The holiday season is just around the corner and those credit cards are tucked away in your bill fold or wallet. Do yourself the favor and put them away before the stores even start advertising this year.
Keep up the good work guys … we’re all fighting for a future that’s positive and bright. We definitely appreciate Federal Debt Relief System and all they do to spread the word and help the common man rise above this time of economic collapse.
Fight On!
MARION - OR