The Last Mystery of the Financial Crisis
It’s long been suspected that ratings agencies like Moody’s and Standard & Poor’s helped trigger the meltdown. A new trove of embarrassing documents shows how they did it
http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619
In this case, the sausage was chock full of e. coli and we all got violently sick. But hey! Look over there! The problem is immigrants, the poor, terrorists (especially terrorists!), not the financial industry which has done more damage to the US (and world!) economy than 100 9/11s. Ignore the man behind the curtain!
Rhinebridge, cheyne and a hell of a lot of other subprime investments ultimately blew to smithereens, taking with them vast amounts of cash – 40 percent of the world’s wealth was wiped out in the aftermath of the mortgage bubble, according to some estimates. 2008 was to the American economy what 9/11 was to national security. Yet while 9/11 prompted the U.S. government to tear up half the Constitution in the name of public safety, after 2008, authorities went in the other direction. If you can imagine a post-9/11 scenario where there were no metal detectors at airports and people could walk on carrying chain saws and meat cleavers, you get a rough idea of what was done to reform the ratings process.
Also of great interest to me is this bit:
‘You F–ked Up, You Trusted Us’: Talking Ratings Agencies With Chris Hayes
http://www.rollingstone.com/politics/blogs/taibblog/you-f-ked-up-you-trusted-us-talking-ratings-agencies-with-chris-hayes-20130621
where there is talk about how the rating agency’s statements about “objectivity, integrity and independence.” were basically just marketing material and thus should be totally ignored:
In that case, the Second Circuit ruled that the plaintiffs suing S&P could not make a fraud claim based upon the company’s reassurances in its Code of Conduct of its “objectivity, integrity and independence.”
Moreover, the Court said, plaintiffs could not make a claim based on a public statement by S&P touting its “credibility and reliability,” or another saying, “[S&P] has a longstanding commitment to ensuring that any potential conflicts of interest do not compromise its analytical independence.”
Why, you might ask, could one not make a fraud claim based upon those statements? Because, the Second Circuit ruled, those statements were transparently not meant to be taken seriously. The following passage is a summary written by S&P’s own lawyers describing the Second Circuit ruling (emphasis mine):
The Second Circuit affirmed the district court’s dismissal of the plaintiffs’ claims in their entirety, finding that the statements concerning the “integrity and credibility and the objectivity of S&P’s credit ratings” were exactly “the type of mere ‘puffery’ that we have previously held not to be actionable.”
More from that same memo from S&P’s lawyers:
The Court found . . . that “generalizations about [S&P’s] business practices and integrity” were “so generalized that a reasonable investor would not depend on [those statements]. . . .”
Because S&P’s statements about its objectivity, independence and integrity are the sort of vague, general statements that courts both within and outside this Circuit have found insufficient to support a fraud action, the Government’s first “alleged scheme to defraud” fails.
Our own courts are against us. You are either on the gravy train or you are in the gravy, there is no place else to go!
