Panel: Credit agencies inflated ratings for cash
McClatchy-Tribune News Service
WASHINGTON — A Senate panel investigating the causes of the nation's financial crisis yesterday unveiled evidence that credit-ratings agencies knowingly gave inflated ratings to complex deals backed by shaky U.S. mortgages in exchange for lucrative fees.
The Senate Permanent Subcommittee on Investigations will hold a detailed hearing today, where its chairman, Sen. Carl Levin, D-Mich., will introduce e-mail records in which executives from Standard & Poor's and Moody's Investors Service acknowledge compromising the integrity of ratings to win business from big Wall Street firms.
The documents to be released today confirm what a McClatchy Newspapers investigation revealed in October — that pressure from top ratings-agency executives to retain market share and the fees that it brought meant that ratings on complex deals were malleable. Some fees were as high as $1.4 million.
The agencies rate the quality of financial products such as bonds and serve as guides trusted by investors. Many of the bonds they rated as top-quality in the recent crisis turned out to be junk. The fallout from their deference to Wall Street's financial firms was a housing collapse that triggered a global financial crisis.