A stream of emails and other documents that have been released reveal, in unflattering detail, how far the credit rating agencies, especially Moody’s and Standard & Poor’s, went to accommodate bond issuers that generated giant fees for the two firms. These documents were released during a five hour hearing held by The House Oversight and Government Reform Committee on October 22 during its review of the role played by the credit rating agencies ( Moody’s, Standard & Poor’s, and Fitch Ratings) in the global credit freeze.
The emails were especially devastating to the credit rating agencies. In 2006, an S&P employee wrote to a co-worker that, “let’s hope we are all wealthy and retired by the time this house of cards falters.” In an instant message exchange, one S&P employee wrote “btw-that deal is ridiculous.” A colleague replied, “it could be structured by cows and we would rate it.”
Moody’s employees also expressed tension and anxiety as the sub-prime mortgage related securities that were awarded top ratings by the firm were staggered by ballooning delinquencies. An unidentified Moody’s employee wrote, as part of a survey after a September a 2007 town hall meeting, “It seems to me that we have blinders on and never question the information we were given. Combined, these errors make us look either incompetent at credit analysis, or likely we sold our sole to the devil for revenue, or a little bit of both.”
Representative Henry Waxman, the chair of the committee, blasted the executives of the three credit rating agencies saying, “The story of the credit rating agencies is a story of colossal failure. The result is that our entire financial system is now at risk.”
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