Court Finds Rating Agencies Not Liable on Toxic Mortgages

By Jonathan Stempel | December 4, 2012

  • December 4, 2012 at 12:38 pm
    youngin' says:
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    I can’t believe the ratings agencies just get to walk away from this mess.

    • December 4, 2012 at 2:42 pm
      Agent says:
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      Should we not believe the ratings issued on insurance companies? How many like AIG cook the books to make themselves look stronger than they are and then we end up bailing them out due to their nefarious activities?

  • December 4, 2012 at 2:53 pm
    D says:
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    How are rating agencies compensated for their product? Does anyone know for sure?

  • December 4, 2012 at 3:17 pm
    Libby says:
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    Companies pay S&P to rate their debt issues. As a result, some critics have contended that S&P is beholden to these issuers and that its ratings are not as objective as they ought to be and that, in fact, this “pay to play” model makes their ratings meaningless at best and perhaps would more accurately be compared to the role of the “shill” in a game of three card monte.

  • December 4, 2012 at 3:18 pm
    Libby says:
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    So, in other words, it’s the fox guarding the henhouse.

    • December 4, 2012 at 3:36 pm
      Agent says:
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      Some of the AIG Group like Chartis have rolled right along with their A ratings from Best even though their parents got caught with their hand in the cookie jar. That only cost us $180 Billion with the bailout. I just use Best to get an indication of financial strength and writings, but I avoid placing business with them. I saw where they acquired the financial services part of Hartford. Where did they get the money to do that?

      • December 4, 2012 at 3:47 pm
        Libby says:
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        Although I hate AIG with my entire being, it was not the insurance division that had their hand in the cookie jar. That part of the business was doing quite well. Probably because they charged premiums knowing the would never pay a claim.

        It was the Financial Services division that caused all the problems.

        • December 4, 2012 at 3:59 pm
          youngin' says:
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          And AIG did not originate the mortgage backed securities that received the inflated ratings, only insured them. Actually they were kind of a victim to the flawed rating process since it was the downgrades of the inflated ratings that triggered all the collateral calls that resulted in AIG needing to be bailed out.

          • December 4, 2012 at 4:00 pm
            Libby says:
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            That’s a new one. AIG the Victim! Ha!

          • December 4, 2012 at 4:05 pm
            youngin' says:
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            There are lots of reasons to hate AIG. Their part in the financial crisis is not one of them, IMO.

          • December 4, 2012 at 4:07 pm
            Libby says:
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            My point exactly. I just find it funny to think of them as a victim, since they’ve been victimizing us for years!

          • December 4, 2012 at 4:49 pm
            Agent says:
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            Youngin, Even if AIG did not originate the securities scam, I think you would agree they were part of the problem, not the solution. AIG Group is a nasty company and has been for a lot of years. Because they were so big, they thought they were above the fray until they were caught. I really get ticked when I see that their executives did not go to jail for their activities.

          • December 4, 2012 at 5:08 pm
            youngin' says:
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            Maybe, I just don’t think in this particular case they committed any worse sins than any other large institutional investors who relied on the rating agencies opinions that MBSs were as safe as US Treasuries when they should have been doing their own assessments. Perhaps the size and sophistication of AIG warranted a higher level of diligence before they accumulated so much risk. And I probably don’t have a full appreciation for all their activities leading up to the bailout. But in my simple understanding, their sin was simply falling for the same scam that fooled many other investors for many years. And the liquidity crisis that hit them and required the gov’t bailout was not due to actual losses on the MBS’s they were insuring, but was caused by the rating downgrades themselves (as the counterparties were all simultaneously freaked out by the downgrade and demanded collateral to insure against potential future losses). So I still put this back on the rating agencies who never should have claimed that MBS’s were equivalent to US gov’t debt in the first place.

        • December 4, 2012 at 4:03 pm
          Agent says:
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          Libby, the insurance divisions of AIG have also been caught doing illegal things. Remember the bid rigging scandal with Marsh? Recently, they were caught misstating reserves on WC claims. This company is like a bad nightmare. Everybody has to play by the rules except them apparently.

          • December 4, 2012 at 4:08 pm
            Libby says:
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            Yes, they’re bad news. But I guess still a necessary evil. Can’t live with them. Can’t let ‘em go belly up. What a shame.

          • December 4, 2012 at 6:03 pm
            Agent says:
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            Let’s look at the big picture here. We are talking about AIG and I don’t care which division is responsible for the mess they were in, they were AIG employees doing this stuff which ended up imperiling the whole company prompting a huge bailout at taxpayer expense and I don’t think they were a victim at all. They obviously didn’t do enough due diligence and greed and making a quick buck may have entered into it.

  • December 5, 2012 at 9:00 am
    Captain Planet says:
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    Holy cow, check this out, for once WE ALL AGREE!

    • December 5, 2012 at 9:16 am
      Libby says:
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      Is it December 21st already?

      • December 5, 2012 at 2:22 pm
        Agent says:
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        If you don’t here from me on the 22nd, you will know something has happened. My guess is the Mayans 1,200 years ago were just making it up.

        • December 6, 2012 at 8:29 am
          youngin' says:
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          Ignore the signs at your peril. First a bacon shortage, then they stop making Twinkies, now everyone in the comments section of an IJ article agree on something?

          • December 6, 2012 at 9:05 am
            Libby says:
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            OMG! It IS the end of the world!!!

          • December 6, 2012 at 9:41 am
            Agent says:
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            We may all agree that our politicians are allowing our country to go over the fiscal cliff instead of using some common sense and dealing with the debt issues that continue to plague the economy. The left, led by the President only wants to raise marginal rates which would pay for 8 days of government operations and the Republicans want to cut tax loopholes on the rich and reign in government spending. The second approach makes more common sense, but doesn’t really address all that needs to be done. Can anyone say Sequestration? It is estimated that upwards of 1 million jobs will be lost just in the Defense Industry when Sequestration begins on 1-1-13. Just what the country needs is more unemployment. Creating tax takers instead of tax payers.

          • December 6, 2012 at 10:03 am
            Libby says:
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            They are playing a dangerous game. I agree with the author of this article (how about that for staying on topic, Agent?) that they should just pass a band-aid right now, but set down strict deadlines for coming to a resolution. The American people have had it with the grandstanding and stubborness. On both sides.

          • December 6, 2012 at 10:04 am
            Libby says:
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            Oops! Wrong article. Oh, well. I tried.

          • December 6, 2012 at 10:41 am
            Agent says:
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            Libby, I am tired of band aids being passed and kicking the can down the road. The country has not passed a budget for 4 years and we have been living on continuing resolutions. It is time for serious people to sit down and work it out. This isn’t the time for the President to go on another $4 million vacation to Hawaii. We ought to lock all these people in a room and tell them not to come out until they come up with real solutions to our fiscal crisis.

          • December 6, 2012 at 11:25 am
            Libby says:
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            The problem is, both sides have no incentive to avoid the fiscal cliff. It’s like a game of chicken to them. Each secretly hoping it happens so they can go to their constituents and say “See I toed the line! It’s THEIR fault.”

            I really think if push comes to shove, they’ll all throw us under the bus.

  • December 6, 2012 at 11:07 am
    youngin' says:
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    Agent, did you just talk about how we need to cut government spending and then lament about the prospect of cutting the defense budget, both in the same post?

    • December 6, 2012 at 12:28 pm
      Agent says:
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      Youngin, wake up! We are spending a trillion plus more than we are taking in. The lion’s share are entitlements, social programs, bureaucracy which needs to be cut drastically. Defense may have some fat in places, but the Sequestration cuts are far more drastic and will cause much more unemployment. Each Department and agency of the government needs to have a big cut in their budget. We can’t keep doing the same things over and over and hoping for a different result.

      • December 6, 2012 at 12:52 pm
        Libby says:
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        There was somewhat of a double-standard in your original statement, though. It would be better if you just owned it or explained it rather try to argue about it and change the subject.

      • December 7, 2012 at 9:10 am
        youngin' says:
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        How can one branch of the government be highly efficient, delivering optimal value for each dollar spent, and the rest of the government is completely inept and full of waste? Republican logic makes me want to scream. This is why I’m more and more leaning Libertarian.

        • December 7, 2012 at 9:20 am
          Libby says:
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          Me, too Youngin’. And I’m an Old-one.

        • December 7, 2012 at 10:40 am
          Agent says:
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          Which branch of government is highly efficient, delivering optimal value for each dollar spent are you talking about? We all know about waste and corruption rampant in most branches of the Federal Government.

          • December 7, 2012 at 11:18 am
            youngin' says:
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            The DoD, which is why it’s so important to never ever ever cut their budget.

  • December 7, 2012 at 8:35 am
    grandmesa says:
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    So there you have it. The ratings agencies are nothing but fluff.
    “Major credit rating agencies won a fresh legal victory on Monday”………who wrote this crap. The ruling is nothing but shows the agencies just shot themselves in the foot!!

    • December 7, 2012 at 9:18 am
      Libby says:
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      Are you in Grand Mesa, CO? Great snowmobiling up there!

    • December 7, 2012 at 9:22 am
      Agent says:
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      How does the Liberty Mutual Group receive a BBB rating with outlook from positive to stable from S&P? They are one of the largest insurance groups in the USA and have always been stronger than garlic on their ratings. I wonder how Best will treat them on the ratings.

      • December 7, 2012 at 10:15 am
        youngin' says:
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        The BBB- is the rating on their debt, I believe, and is still considered investment grade, according to S&P’s website. So it is relevant to investors but not policyholders. I believe the A- rating is the financial strength rating relevant to policyholders. I’m not 100% sure that my interpretation is correct, but I know that LM issues bond-like debt despite being a mutual. I saw you posted a similar comment in the other article so I assume you read the same information as I did.



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