The Double A Lounge

Ratings agencies ‘put system at risk,’ CEO says

Now that some of the smoke is clearing on our financial crisis, the real players are starting to appear.  We used to hear about companies like Standard & Poor’s, Moody’s, and Fitch Ratings when people would talk about the value grade of investments.  It’s starting to become very clear what role they played in all of this:

Between 2002 and 2007, the agencies rated a flood of mortgage-related
securities issued by Wall Street firms, giving many of the securities a
coveted AAA rating at the time, only to downgrade most of them as house
prices tanked and defaults spiked. The subsequent collapse in the value
of those securities has taken the global financial system to the “brink
of the abyss,” in the words of the head of the IMF.

Bottom line is that they profited greatly by rating many investments much higher than they should have been.

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