Who can believe Ratings Agencies, especially Standard and Poor's Ratings, after this?

O

onq

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http://www.bloomberg.com/news/2011-08-31/subprime-mortgage-bonds-getting-aaa-rating-s-p-denies-to-u-s-treasuries.html?cmpid=bit

[broken link removed] is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government...

 S&P is poised to provide AAA grades to 59 percent of Springleaf Mortgage Loan Trust 2011-1, a set of bonds tied to $497 million lent to homeowners with below-average credit scores and almost no equity in their properties. New York-based S&P stripped the U.S. of its top rank on Aug. 5, saying Washington politics were making the country less creditworthy....


...S&P has said it made mistakes in structured finance since the crisis including misunderstanding cash flows and using conflicting methods to analyze the securities....

...Securitization enabled by S&P contributed to more than $2 trillion in losses and writedowns at the world’s largest financial institutions and the collapse of Lehman Brothers Holdings Inc. three years ago, causing credit markets to seize up and leading to the global recession....

...The firm lowered the ratings on 308 classes of such deals in May 2010, cutting to CCC from AAA a $10 million bond created by Credit Suisse Group AG nine months earlier, saying mortgage defaults were turning out to be worse than it forecast. S&P said in December it would need to review 1,196 re-remic securities because it had “incorrectly analyzed” the debt in light of the structure of the underlying deals....

Timeshare Loans

...Wyndham Worldwide Corp.’s finance unit may have won higher grades on two of three deals backed by timeshare loans in 2010 and 2011 that S&P said this month it ranked using an “incorrect priority of payments sequence in our analysis.” Among the ratings affected were those on $249.7 million of A+ notes. Wyndham added “funds to newly created reserve accounts” to skirt downgrades, S&P said in an Aug. 12 statement....

 
Yes, I find it hard to believe, those sub prime securities should have the same credit rating as the US government. The mistake is on the rating of the sub prime securities not on the rating of the US government, which should have a much lower credit rating.
 
Very witty Chris, but you don't know the half of it - none of us do.

Here is a guy from Moody's blowing the top of what goes on there.

http://www.businessinsider.com/moodys-analyst-conflicts-corruption-and-greed-2011-8#ixzz1VyihDRRn

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Harrington believes the SEC's proposed rules will make the integrity of Moody's ratings worse, not better. He also believes that Moody's recent attempts to reform itself are nothing more than a pretty-looking PR campaign.
We've included highlights of Harrington's story below. Here are some key points:

  • Moody's ratings often do not reflect its analysts' private conclusions. Instead, rating committees privately conclude that certain securities deserve certain ratings--but then vote with management to give the securities the higher ratings that issuer clients want.

  • Moody's management and "compliance" officers do everything possible to make issuer clients happy--and they view analysts who do not do the same as "troublesome." Management employs a variety of tactics to transform these troublesome analysts into "pliant corporate citizens" who have Moody's best interests at heart.

  • Moody's product managers participate in--and vote on--ratings decisions. These product managers are the same people who are directly responsible for keeping clients happy and growing Moody's business.

  • At least one senior executive lied under oath at the hearings into rating agency conduct. Another executive, who Harrington says exemplified management's emphasis on giving issuers what they wanted, skipped the hearings altogether.
Harrington's story at times reads like score-settling: The constant conflicts and pressures at Moody's clearly grated on him, especially as it became ever clearer that his only incentive not to "cave" to an issuer's every demand was his own self-respect.
But Harrington's story also makes clear just how imperative it is that the ratings-agency problem be addressed and fixed. The current system, in which the government blesses organizations as deeply conflicted as Moody's with the power to determine sanctioned bond ratings is untenable. And the SEC's proposed rule changes won't fix a thing.

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These people have downgraded COUNTRIES!!!

Past time they were hung out to dry.
 
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