It's Good to See Moody's Rebuilding Its Franchise

Richard Smith Naked Capitalism December 15, 2010

Good to see Moody’s rebuilding its franchise. Their aura of mystery is still reassuringly intact, two years after the subprime CDO ratings fiasco; as a bemused Firedoglake notes, in connection with two diametrically opposed, and politically charged, opinions about the tax cuts and their projected effect on the US credit rating:

Can someone tell me why the same guy, at the same ratings agency, does a 180 in less than one week, when the deal hasn't changed an iota?

A cynic might think that the Dec 7th report was Moody’s putting all its credibility behind the deal to extend the tax cuts, while the Dec 12th report was Moody’s putting all its credibility behind a move to ensure Obama got no political credit for it, once the deal, that they had implicitly supported a week earlier, was looking much more certain. That type of maneuver will have a familiar feel to the bedraggled Obama, one suspects.

Anyhow, if you are shocked, shocked at the idea of credit rating agencies working a political angle, you can comfort yourself with the thought that no stratagem underpinned by all Moody’s credibility is going to be very threatening.

With those reminders of old and recent form, let us consider what Moody’s has to say about the Kemp v. Countrywide Home Loans Inc. case, wherein an erstwhile Countrywide employee strayed off the script and admitted that Countrywide typically failed to deliver mortgage notes to trustees for home-loan securities. If Countrywide (or BofA) wanted to have a credible party to show all was well in mortgage-land, it would need to be someone independent and with some investigative skills; but they’ve got Moody’s instead.

One notes in passing that the review by Moody’s is unaccompanied by full disclosure of Moody’s earnings on rating Countrywide securitizations. One also notes that Moody’s are surprisingly keen to acknowledge that the operational practices of securitizers fall within their purview. One wonders how compromised they would be by any revelation that there were wholesale failures to deliver mortgage notes properly into the trusts of Moody’s-rated issues.

Moody’s, unsurprisingly, says it ain’t so, for Countrywide, anyway, and Bank of America can breathe again, except that:

Confidentiality restrictions prevent Moody's from saying which documents it reviewed, Forster said. The ratings company referred to the documents in a Dec. 9 report.

Relying on Moody’s opinions didn’t work out too well for any of the maimed operations now huddled under the Bank Of America umbrella: not Countrywide, nor Merrill Lynch, nor BoA itself, so let’s see how well “taking Moody’s word for it” works out, this time.

Those foolish enough to trust Moody’s opinions about anything DESERVE the financial cataclysm that they will receive as a result. TBTF – Not just Wall Street banks.

The worst thing is that tax cuts for the generate bubbles, which could push us into a depression. Yet, none of the ratings corporations warned us of this.

Of course, the clients of the ratings agencies are rich banksters and brokesters who don’t want to pay anywhere near their fair share in taxes.

Without details of what they actually reviewed you have no idea what Moodys are specifically alluding to. The documents reviewed could just be standard process documents which may not have been followed. I suspect Moodys will have done some checks, but I would not rule out that some fudgery happened to pass the tests. I dont think Moodys will leave any evidence that they had a political motive, but the language of what they did say suggests that they are saying something subtly different to the assumed implications. In essence they may have had a motivation to present their findings in a way which could be misinterpreted. What they might be saying is countrywide have a processes in place and there is evidence that they have followed the process over the very recent past.

False ratings, false accounting standards, aren’t they all just excuses to justify counterfeiting?

Why on earth would any business willing use phony accounting standards? It doesn’t make any sense EXCEPT in banking apparently.

As for false investment ratings, where is the free market? Shouldn’t Moody’s reputation be irrevocably ruined? Why haven’t more competent competitors taken over from them?

We call this free market capitalism? It is more of a joke than that.

Risk management. The investment banks and others can use the rating agency financial product endorsements to skirt stringent SEC reporting requirements and due diligence, allowing for escape of culpability for the fraud they perpetuate on the American public (in the unlikely event they would be prosecuted). All for a relatively cheap price.

But you know that, as I have read your comments regarding the rating agencies from past articles. But the beat goes on.

I think that what we are seeing today in the financial fiasco that’s taken place, is analogous to a pack of Hyena’s circling the kill. All the player see that no one has been punished, that instead, they are getting off Scott free, even picking up where they left off, just as with the kill, when a bigger predator comes along and wants his bite, they back off, only to return when the bigger predator has left.

All three raters issued asset backed rating criteria for rmbs wherein they agreed to take a pledge of a loan and a true sale opinion in lieu of due diligence under the psa or the mlpa. If you can’t find, let me know.

Moody’s has about as good a prediction track record as Bill Kristol.

Even a passive observer understands the ratings agencies marked up the value of toxic loans, causing the 2007 mess.

So why would anyone think Moody’s isn’t still in CYA mode?

The only loyal clients raters would appear to have are banks, who need say-anythings like Moody’s to bless their fraud.

While certainly not a lawya, bankin’skola or whutzas, I certainly have seen enough dogs to know what they leave behind.

With raters like Moody’s who needs shills?

Poor “bedraggled Obama” is laughing all the way to the bank, while the untouchable Moody’s provides conflicted, counterfeit cover.

Excellent links FB.

Tastes vary greatly. And thanks for impersonating Yves since that is sure to seal your fate.

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It's Good to See Moody's Rebuilding Its Franchise

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