Morgan Stanley being Investigated for having S&P investors inflate ratings

Morgan Stanley (MS) successfully pushed Standard & Poor’s and Moody’s Investors Service Inc. to give unwarranted investment-grade ratings in 2006 to $23 billion worth of notes backed by subprime mortgages, investors claimed in a lawsuit, citing documents unsealed in federal court.

Executives at the ratings firms failed to warn investors about the risks associated with subprime-backed notes that were issued by a unit of London-based hedge fund Cheyne Capital Management Ltd. because they wanted to reap financial rewards from doing business with Morgan Stanley, the sixth-largest U.S. bank by assets and designer of the notes, the investors allege, citing the material made public yesterday in Manhattan.

Full article can be found on Bloomberg (http://www.bloomberg.com/news/2012-07-02/morgan-s…)

 
UFOinsider:
On an aside, how is it a potential crime to push the ratings agencies a certian way....but the ratings agencies themselves can't / haven't been held to account?

Plus you'd think they would lose their reputation since their whole business is built on providing unbiased ratings. It's much more acceptable to me that someone would try to bribe them rather than they actually accept it.

This to all my hatin' folks seeing me getting guac right now..
 
Best Response
Cruncharoo:
UFOinsider:
On an aside, how is it a potential crime to push the ratings agencies a certian way....but the ratings agencies themselves can't / haven't been held to account?

Plus you'd think they would lose their reputation since their whole business is built on providing unbiased ratings. It's much more acceptable to me that someone would try to bribe them rather than they actually accept it.

I'm an outsider working in, so my my my perspective ratings agencies look like a court that doesn't have an appeals process and is funded by donations from criminals and/or defence attorneys....whoever's got the money at the moment gets the rating they want. It's mindblowing corrupt, I fail to see why this of all things isn't getting attention. Forget some prop desk that loses/gains a few bucks, this is a systemic black hole of accountability.
Get busy living
 
UFOinsider:
On an aside, how is it a potential crime to push the ratings agencies a certian way....but the ratings agencies themselves can't / haven't been held to account?
It starts to become a problem when the agency has a conflict of interest, you exploit that conflict of interest, and you tell investors that the agency is unbiased.

It is like selling a home with termites and picking your best buddy to be the home inspector for the buyer.

 

The rating agencies, Moody's, S&P, and Fitch what they do is take money for banks like MS, and they give out AAA ratings to shitty securities. AAA ratings generally go to things issued from the US Treasury, then when the shit hits the fan, the rating agencies say "the ratings our opinions and should be taken with a grain of salt", and they are protected by the first amendment, the right to free speech.

It's complete bullshit; they will never be held accountable. They said the same shit in the 2007-2008 financial crisis investigation on Capital Hill.

 

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