| Finally a large financial entity, Calpers, the California | | | | sell..... because Moodys, and Fitch, and Standard |
| Public Employees Retirement System, worth an | | | | and Poors were slapping triple A ratings on them.... |
| estimated $173 billion, has sued those responsible | | | | the highest rating possible. |
| for rating the Toxic Assets that are now | | | | It makes one wonder why Calpers, who has |
| decimating our national and global economy. The | | | | probably some of the most sophisticated financial |
| three primary rating agencies; Moodys, Standard | | | | experts in the industry, could not detect the risk |
| and Poors, and Fitch made "negligent | | | | in these securities? The reason was because of |
| misrepresentations" to the pension fund. The | | | | their opaqueness. The information about what |
| agencies' ratings "proved to be wildly inaccurate | | | | was inside of them was kept hidden from the |
| and unreasonably high." Calpers goes on to say | | | | buyer under the guise that "the securities in these |
| that the methods used to assess these securities | | | | packages were considered proprietary and |
| were "seriously flawed in conception and | | | | unavailable for review". Hence the triple A rating |
| incompetently applied". | | | | was the key measuring gauge the investor had, |
| It has been my contention all along that this group | | | | to determine the risk in the product that they |
| is by far the most culpable in this affair, because | | | | were buying. |
| they took perfectly lousy financial instruments and | | | | Furthermore, Calpers contends in their suit that |
| slapped triple A ratings on them; the equivalent of | | | | the rating agencies were not only responsible for |
| United States Bonds. These complicated | | | | inaccurately rating these financial securites, but |
| instruments that only the most sophisticated | | | | that there was an "inherent conflict of interest", |
| financial engineers could understand, were pushed | | | | since they were actually paid by the companies |
| onto countries, cities, municipalities and large | | | | issuing the securities. Finally, the insidious behavior |
| pension funds as the greatest and safest | | | | of these institutions reached a new ethical low |
| investment since the United States Savings Bond, | | | | when Calpers revealed in their lawsuit that the |
| yet they were the farthest thing from safe. Most | | | | agencies themselves actually assisted, for a hefty |
| of these instruments have now lost ALL of their | | | | fee, those who were creating these securities, so |
| intrinsic value. | | | | that they would produce a product that would |
| It wasn't until the three credit agencies set their | | | | receive the prestigious triple A rating. |
| stamp of approval on these incredibly risky | | | | No wonder Calpers decided to sue the rating |
| investments that the mortgage backed securities | | | | agencies. My only question is what took them so |
| boom on Wall Street exploded. Wall Street | | | | long? Furthermore, why hasn't a criminal |
| entrepreneurs sold their new product to anyone | | | | investigation been initiated? There are people and |
| looking for a larger annual return. | | | | corporations out there that are undeniably |
| After they were sold, the inflow of money (billions | | | | responsible for our financial mess, and in my |
| or more likely trillions of dollars) was then funneled | | | | opinion, should be held accountable. After all, as |
| back to mortgage lenders like Countrywide and | | | | financial agents they have a fiduciary responsibility |
| New Century Mortgage, who were busy | | | | to the public, and by issuing triple A ratings on |
| underwriting these risky high yield, subprime loans; | | | | these securities they not only abandoned their |
| the key element within the financial instruments | | | | responsibility, but assisted in the meltdown of our |
| that the giants on Wall Street were so | | | | global economy. |
| successfully selling. In other words, the securities | | | | In this time of re-regulating the banking industry, |
| were selling like hot cakes and Wall Street couldn't | | | | and trying to create laws that would prevent a |
| get enough mortgages to back them, and so | | | | similar situation, if we do not address this conflict |
| they pushed their lending partners to create more | | | | of interest, between Wall Street and the agencies |
| loans no matter how risky. Why....because they | | | | that rate their financial instruments, we are certain |
| already had them sold to China, Calpers, cities in | | | | to repeat the mistakes that led us into this |
| Norway, etc..... and why were they so easy to | | | | current financial crisis. |