the governments had so loosened financial oversight
that the bankers who crashed the world actually
did "nothing illegal", or perhaps not actionably so.
And to hear idiots on tv saying to put them away,
because of austerity or big bonuses,
is insanity. I think only Max Keiser knows that
some laws were actually broken. But in any case
nobody will go to jail.
The only warning I can spew is that market players,
who know the markets are fake, need to remember
that capitalism is a game of trust. If that evaporates
completely, then all hell breaks loose.
For now,
we know everything about the
truck that is rolling over our skulls
and can do nothing to deter it. checkit: Rolling Stone
'You F--ked Up, You Trusted Us': Talking Ratings Agencies
With Chris Hayes
By Matt Taibbi
POSTED: June 21, 11:25 AM ET
"Standard
& Poor's has long had strict policies to reinforce the independence of our
analytical processes. . . . We make our methodology transparent to the
market."
That was among the responses of a spokesperson for the
ratings agency Standard & Poor's when I contacted him a few weeks ago in
advance of a new Rolling Stone feature, "The Last Mystery of the Financial
Crisis," which describes the role the ratings agencies played in causing
the 2008 crash. The company was genuinely miffed that anyone would impugn its
honesty. In one relatively brief e-mail, the spokesperson used variables of
terms like "independent," "integrity" and
"transparent," upwards of nine times.
Hold that thought.
"The Last Mystery of the Financial Crisis" makes
great use of documents uncovered in years of painstaking research by attorneys
at Robbins Geller Rudman & Dowd, a San Diego-based firm that was at the
forefront of major lawsuits against the industry. The material those lawyers
found leaves virtually no doubt that the great ratings agencies like Moody's
and S&P essentially put their analysis up for sale in the years leading up
to the crash.
I picked some of the more damaging of these documents to ask
about. Like for instance, an email from a company executive reading, "Lord
help our fucking scam. . . . This has to be the stupidest place I have worked
at."
Out of context, they said.
What about other highly suggestive emails, like the one in
which an analyst joked that "we have just stuck our preverbal [sic] finger
in the air!!", or the one in which an analyst admitted his quantitative
model was only marginally more reliable than "flipping a coin"?
Not only cherry-picked and out of context, but
"contradicted by other evidence," is how the S&P man put it.
"They do not reflect our culture, integrity or how we
do business," he said. Note the word integrity again.
I point this out because the ratings agencies' responses to
the questions we posed for the piece were almost as revealing as the extremely
damaging emails and internal documents the Robbins Geller lawyers uncovered.
It wasn't just that there was apparently an entire
generation of internal email correspondence that had been taken out of context
(apparently, the context was taken out of context). More interesting was
another line of defense.
Not long before I contacted them, S&P had made, in a
very graphic and comical manner, a very strange argument in court. In an
attempt to dismiss a federal Justice Department lawsuit pending against
S&P, the company had, in a court motion, cited a Florida court case, Boca
Raton Firefighters and Police Pension Fund v. Bahash.
...
The Second Circuit
affirmed the district court's dismissal of the plaintiffs' claims in their
entirety, finding that the statements concerning the "integrity and
credibility and the objectivity of S&P's credit ratings" were exactly
"the type of mere 'puffery' that we have previously held not to be
actionable."
More from that same memo from S&P's lawyers:
The Court found .
. . that "generalizations about [S&P's] business practices and
integrity" were "so generalized that a reasonable investor would not
depend on [those statements]. . . ."
Because S&P's
statements about its objectivity, independence and integrity are the sort of
vague, general statements that courts both within and outside this Circuit have
found insufficient to support a fraud action, the Government's first
"alleged scheme to defraud" fails.
Now, in response to my questions, the S&P spokesman made
a series of arguments about the plaintiffs in the lawsuits in question. All of
these points came down to the same idea: that these investors were big boys,
and should have known better than to rely upon an S&P rating.
"Most of the plaintiffs were sophisticated
institutional investors that did not actually rely on the ratings in making
decisions," he wrote. These plaintiffs, he went on, were "large
institutional investors with significant investment staffs of their own,"
and some of them, he pointed out, didn't cover themselves in glory with their
background research.
One institutional investor, he wrote, "admitted that it
did no more than look at the rating and the yield on a Bloomberg screen,
spending no more than five minutes deciding to invest $50 million." All
they did was look at our rating before investing! What idiots!
This is straight out of Animal House. It's the Wall Street
version of, "You fucked up – you trusted us!"
I don't often get angered by the things press spokespeople
say. Most of these people have difficult jobs and are often forced to be the
public faces of policies they had nothing to do with creating.
But in this case, S&P just a few weeks before had sworn
before a judge that its reassurances about objectivity, integrity and
independence were not legally binding, vague, and so generalized as to be
essentially meaningless.
Yet when I contacted this company, they sent me exactly, and
I mean exactly, the same reassurances about objectivity, integrity, and
independence that they themselves had laughed at as "mere puffery,"
"vague," and "so generalized that a reasonable investor would
not depend" on them.
Then they went on to deride the plaintiffs in their lawsuit
for not being smart enough to do their own research and make their own
assessments about the meaning of an S&P rating, and the value of its
reassurances of independence and integrity. Yet us reporters are apparently
still expected to take such assurances at face value, which if my math is
correct means that in their eyes, we must be even dumber than the investors in
the products they rate. What a bunch of assholes!
Anyway, if you want the full lowdown on what actually goes
on internally at these companies, check out the piece, which is full of the
devastating material dug up by those San Diego lawyers.
Also, thanks so much to the excellent Chris Hayes at MSNBC,
who had me on last night to discuss the issue. It was a very fun talk.
Read more:
http://www.rollingstone.com/politics/blogs/taibblog/you-f-ked-up-you-trusted-us-talking-ratings-agencies-with-chris-hayes-20130621#ixzz2XbaketzD
