Financial Lunatics

Michael Lewis and David Einhorn’s editorial in the NYT is a must read. Most of it is just stating the obvious, but since the obvious has been flatly denied for a decade - it is worth saying:

The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

Link

This entry was posted on Sunday, January 4th, 2009 at 7:54 pm and is filed under Indianalaw. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.