Sunday, October 18, 2009

Quis custodiet ipsos custodes?*

McClatchy takes a deep look at Moody's Investors Service transformed itself from the watchdog of bond quality on Wall St to the running dog of the investment hustlers, putting their once respected OK on unadulterated crap, for the right price.
A McClatchy investigation has found that Moody's punished executives who questioned why the company was risking its reputation by putting its profits ahead of providing trustworthy ratings for investment offerings.

Instead, Moody's promoted executives who headed its "structured finance" division, which assisted Wall Street in packaging loans into securities for sale to investors. It also stacked its compliance department with the people who awarded the highest ratings to pools of mortgages that soon were downgraded to junk. Such products have another name now: "toxic assets."
All for the worshiped profit that would make or break your options. Give them a good rating and they pay more, Moody's make more and you get rewarded. But the question that is barely touched on is how street wise people who could see what the results of their actions were could turn a blind eye to the consequences. Or as Lawrence McDonald, a former VP at Lehman Bros. suggests,
"How on earth could a bond issue be AAA one day and junk the next unless something spectacularly stupid has taken place? But maybe it was something spectacularly dishonest, like taking that colossal amount of fees in return for doing what Lehman and the rest wanted,"
Dishonesty or just totally unrestrained greed is yet to be determined, but it is appalling to see how quickly Moody's gave up the only thing of value thing of value it had for a bag of gold. Or as Shakespeare put it so well on Othello,
Who steals my purse steals trash; 'tis something, nothing;
'Twas mine, 'tis his, and has been slave to thousands;
But he that filches from me my good name
Robs me of that which not enriches him,
And makes me poor indeed.


*Who watches the watchers?

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