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Actually, what the ratings agencies did and how they rated financial products was very well-known, and publicly disclosed to investors:
I must admit I haven't read through all these comments, because it sure seems to me I've read most of them too many times already, but this one comment is interesting in light of some facts that seem to suggest these rating agencies were not as entirely above board as some think...
Credit rating firm Standard & Poor's will pay $1.5 billion to resolve a collection of lawsuits over its ratings on mortgage securities that soured in the run-up to the 2008 financial crisis, concluding one of the U.S. government's most ambitious cases tied to the housing collapse.
Sure sure sure. Nuremburg Defense. It's okay to mislead investors and admit don't so as long as no one is charged with a federal crime.
There was no misleading done by the ratings agencies. They publicly disclosed EXACTLY the limitations of their ratings. Even the SEC admits that.
Quote:
But now you are moving the goal posts.... So it should be the investors fault for not looking at the publicly disclosed info?
What, exactly, are you misunderstanding about PUBLIC DISCLOSURES?
The BIGGEST fault lies with the MBS-issuers who lied about the level of risk in their MBS. And the WORST offenders were the GSEs. They single-handedly lowered the entire mortgage industry's lending standards so that low-income and credit-compromised borrowers could get mortgages, per the Clinto Admin HUD's orders. And when manual underwriting kicked out too many of those loans as too high-risk, they created and implemented "automated underwriting" systems that over-approved by 65% too many risky loans.
That's why all Americans got hit with the $2 trillion QE invisible inflation tax so the Federal Reserve could buy GSE MBS.
I must admit I haven't read through all these comments, because it sure seems to me I've read most of them too many times already, but this one comment is interesting in light of some facts that seem to suggest these rating agencies were not as entirely above board as some think...
How are they not above board when they very publicly and very clearly stated their disclosures about the limitations of their ratings? Even the SEC admits that.
Quote:
Credit rating firm Standard & Poor's will pay $1.5 billion to resolve a collection of lawsuits over its ratings on mortgage securities that soured in the run-up to the 2008 financial crisis, concluding one of the U.S. government's most ambitious cases tied to the housing collapse.
Yes, the US Government with their unlimited resources (whereas S&P as a private corp has limited resources with which to pursue their innocence in court) bullied them into a settlement. BUT, did you notice that the US Government ALSO admitted S&P did NOT commit fraud or any illegal acts? Read the SEC's findings I posted, earlier.
There was no misleading done by the ratings agencies. They publicly disclosed EXACTLY the limitations of their ratings. Even the SEC admits that.
What, exactly, are you misunderstanding about PUBLIC DISCLOSURES?
The BIGGEST fault lies with the MBS-issuers who lied about the level of risk in their MBS. And the WORST offenders were the GSEs. They single-handedly lowered the entire mortgage industry's lending standards so that low-income and credit-compromised borrowers could get mortgages, per the Clinto Admin HUD's orders. And when manual underwriting kicked out too many of those loans as too high-risk, they created and implemented "automated underwriting" systems that over-approved by 65% too many risky loans.
That's why all Americans got hit with the $2 trillion QE invisible inflation tax so the Federal Reserve could buy GSE MBS.
No no no. Sounds like investors didn't have enough personal responsibility and should have looked at those documents you are referring to.
No no no. Sounds like investors didn't have enough personal responsibility and should have looked at those documents you are referring to.
And exactly what would they be looking at when the MBS-issuers, most notably the GSEs, lied about the level of risk in their MBS? Remember the "automated underwriting systems" the GSEs foisted on loan originators? That means no manual underwriting. No verification. No paper trail.
And exactly what would they be looking at when the MBS-issuers, most notably the GSEs, lied about the level of risk in their MBS? Remember the "automated underwriting systems" the GSEs foisted on loan originators? That means no manual underwriting. No verification. No paper trail.
According to you they should have know they were very risky as it was disclosed. It's pretty simple.... Based on your narrative.. That creating risky loans maybe risky. Investors should have known.
But that doesn't make the people that went along with it or profited from that not guilty of this mess.
Went along with it? HUD and the GSEs made it impossible to not go along with it. Guess who are the largest source of mortgage loan financing in the US? The GSEs. Guess who sets mortgage lending standards? The GSEs. Guess who foisted automated underwriting systems on loan originators? The GSEs.
How are they not above board when they very publicly and very clearly stated their disclosures about the limitations of their ratings? Even the SEC admits that.
Yes, the US Government with their unlimited resources (whereas S&P as a private corp has limited resources with which to pursue their innocence in court) bullied them into a settlement. BUT, did you notice that the US Government ALSO admitted S&P did NOT commit fraud or any illegal acts? Read the SEC's findings I posted, earlier.
Assuming I found the right link of the many I might have to search for/through, which of these findings would you care to focus upon?
• significant aspects of the ratings process were not always disclosed;
• policies and procedures for rating RMBS and CDOs can be better documented;
• the rating agencies are implementing new practices with respect to the
information provided to them;
• the rating agencies did not always document significant steps in the ratings
process -- including the rationale for deviations from their models and for rating
committee actions and decisions -- and they did not always document significant
participants in the ratings process;
• the surveillance processes used by the rating agencies appear to have been less
robust than the processes used for initial ratings;
• issues were identified in the management of conflicts of interest and
improvements can be made; and
• the rating agencies’ internal audit processes varied significantly.
According to you they should have know they were very risky as it was disclosed.
No, the risk level wasn't disclosed. Why do you think F&F needed a bailout, and the Federal Reserve had to create $2 trillion in QE to but GSE MBS?
Had the REAL level of risk been disclosed by the GSEs, the mortgage market would have corrected itself long before so much damage was done. If the REAL risk level was known, GSE MBS and subsequently created CDOs would be MUCH less attractive to investors, which would have dried up the funding available to the GSE's to buy an even larger amount of high-risk loans.
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