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marmar

(77,045 posts) Sun Mar 20, 2016, 10:12 AM Mar 2016

The Indisputable Role of Credit Ratings Agencies in the 2008 Collapse, and Why Nothing Has Changed

The Indisputable Role of Credit Ratings Agencies in the 2008 Collapse, and Why Nothing Has Changed

Saturday, 19 March 2016 00:00
By Deena Zaidi, Truthout | News Analysis

A scene from the Oscar-nominated movie The Big Short depicts the important role of credit ratings agencies during the Great Recession. It shows Melissa Leo as an employee of Standard & Poor's (one of the big three credit ratings agencies) explaining to Steve Carell (who plays a hedge fund manager) why S&P continues to give AAA ratings to mortgage-backed securities (consisting of junk loans). The answer given by her is: "They'll just go to Moody's."

The role of the credit ratings agencies during the financial crisis remains highly criticized and mostly unaccountable. The agencies have been blamed for exaggerated ratings of risky mortgage-backed securities, giving investors false confidence that they were safe for investing. While criticizing the ratings by credit ratings agencies in an op-ed for The New York Times, columnist Paul Krugman wrote, "The skewed assessments, in turn, helped the financial system take on far more risk than it could safely handle." In 2011, the Financial Crisis Inquiry Commission found that these ratings agencies "were key enablers of the financial meltdown."

Reforms for credit ratings agencies have been given importance in the 2016 presidential primary debates. In his financial reform proposal, Bernie Sanders aims to change the business model used by the credit ratings agencies to a nonprofit model, keeping it independent of Wall Street. On the other hand, in her vision of financial reforms, Hillary Clinton keeps the credit ratings agencies untouched.

However, since the global financial crisis, not much has changed. While strict reforms under the Dodd-Frank Act have been successful in dedicating an entire chapter to fix the credit ratings agencies, much of the rules have yet to be implemented, since the private sector continues to rely on the same companies for investment opinions. The big three credit ratings agencies continue to control 95 percent of the credit ratings market, with major companies like Pimco (the world's largest bond investor) and Calpers (the nation's biggest pension fund) relying on at least one of these big three agencies' ratings. ...............(more)

http://www.truth-out.org/news/item/35237-the-indisputable-role-of-credit-ratings-agencies-in-the-2008-collapse-and-why-nothing-has-changed

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The Indisputable Role of Credit Ratings Agencies in the 2008 Collapse, and Why Nothing Has Changed (Original Post) marmar Mar 2016 OP

Mean while : Hillary Helps a Bank—and Then It Funnels Millions to the Clintons FreakinDJ Mar 2016 #1

Where do you get the balls to criticize St. Hillary The Annointed? Hoppy Mar 2016 #2

Its a Gift FreakinDJ Mar 2016 #3

The entire system is corrupt and needs major reform. The ratings agencies, the financial appalachiablue Mar 2016 #4

FreakinDJ

(17,644 posts)

1. Mean while : Hillary Helps a Bank—and Then It Funnels Millions to the Clintons

Reply to marmar (Original post)

Sun Mar 20, 2016, 10:16 AM

Mar 2016

No wonder the working class never get a break

Hillary Helps a Bank—and Then It Funnels Millions to the Clintons

The Wall Street Journal’s eyebrow-raising story of how the presidential candidate and her husband accepted cash from UBS without any regard for the appearance of impropriety that it created.

The Swiss bank UBS is one of the biggest, most powerful financial institutions in the world. As secretary of state, Hillary Clinton intervened to help it out with the IRS. And after that, the Swiss bank paid Bill Clinton $1.5 million for speaking gigs. The Wall Street Journal reported all that and more Thursday in an article that highlights huge conflicts of interest that the Clintons have created in the recent past.

The piece begins by detailing how Clinton helped the global bank.

http://www.theatlantic.com/politics/archive/2015/07/hillary-helps-a-bankand-then-it-pays-bill-15-million-in-speaking-fees/400067/

If only she worked as hard for the common everyday Working Class stiff

Hoppy

(3,595 posts)

2. Where do you get the balls to criticize St. Hillary The Annointed?

Reply to FreakinDJ (Reply #1)

Sun Mar 20, 2016, 10:29 AM

Mar 2016

FreakinDJ

(17,644 posts)

3. Its a Gift

Reply to Hoppy (Reply #2)

Sun Mar 20, 2016, 10:31 AM

Mar 2016

appalachiablue

(41,102 posts)

4. The entire system is corrupt and needs major reform. The ratings agencies, the financial

Reply to marmar (Original post)

Mon Mar 21, 2016, 12:23 PM

Mar 2016

press, the SEC and regulators, the banks, investment houses, the mortgage/real estate industry and Treasury officials are infested with the same ethos of reckless greed. One hand washes the other for more profit. The well done 'The Big Short' film depicted a good deal of the scale of the subprime mortgage fraud in the 2000s, saw it twice and recommend.
For 75 years banking was a safe, boring industry after the financial reforms brought by FDR following the Crash of 1929, until the Burn down of 2008. The highway for decades of fraud was enabled by the creation of the new primary financial instrument-MBS, mortgage backed securities by trader Lewie Ranieri with Salomon Bros. and BAC in 1977 and also deregulation of the financial sector by Reagan and Clinton.
Bernie Sanders is correct about breaking up the big banks, making the credit rating agencies non profit and separate from WS, reviving the US Postal Service for citizen banking and implementing a tax on Wall Street financial speculation to assist in the costs of affordable college. The latter is not a new concept. In 1943 FDR created the SEC and also funded the new government agency through a tax on Wall Street speculation that lasted into the 1960s.

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