“They [Wall Street investment bankers] then convinced ratings agencies like Moody’s and S&P to give that top tranche the highest AAA rating — meaning it has close to zero credit risk.”
I think convinced is too lenient a word to use. IMO there was something criminal or near criminal in granting AAA rating to subprime mortgage-backed securities. There’s no way someone can “convince” me that a pool of junk mortgages can have AAA associated with it, no matter how you dice it, or how much you polish it.
The big issue here is that it was Wall Street paying the three rating agencies for their rating. Conflict of interest! Or, as humans learned thousands of years ago, you don’t put the fox in charge of the henhouse.
The clowns at S&P, Moody’s, and Fitch, should be personally prosecuted in civil and criminal courts. They were the crucial chain link in the whole scheme. [/quote]
Yes, the only loans that should get AAA are those held by govt employees with 15 or more years of service with no chance of layoff.
Dylan Ratigan on CNBC was attempting to take S&P guest to task back last fall and you could tell producers were screaming in his ear to shut up. He was lucky he didnt get fired that day for having the temerity to ask simple questions like how could S&P rate all this junk as AAA?
