Matt Taibbi Talks Ratings Agencies With Chris Hayes | Matt Taibbi | Rolling Stone - 0 views
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"Standard & Poor's has long had strict policies to reinforce the independence of our analytical processes. . . . We make our methodology transparent to the market." That was among the responses of a spokesperson for the ratings agency Standard & Poor's when I contacted him a few weeks ago in advance of a new Rolling Stone feature, "The Last Mystery of the Financial Crisis," which describes the role the ratings agencies played in causing the 2008 crash. The company was genuinely miffed that anyone would impugn its honesty. In one relatively brief e-mail, the spokesperson used variables of terms like "independent," "integrity" and "transparent," upwards of nine times. Hold that thought. "The Last Mystery of the Financial Crisis" makes great use of documents uncovered in years of painstaking research by attorneys at Robbins Geller Rudman & Dowd, a San Diego-based firm that was at the forefront of major lawsuits against the industry. The material those lawyers found leaves virtually no doubt that the great ratings agencies like Moody's and S&P essentially put their analysis up for sale in the years leading up to the crash.
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Moreover, the Court said, plaintiffs could not make a claim based on a public statement by S&P touting its "credibility and reliability," or another saying, "[S&P] has a longstanding commitment to ensuring that any potential conflicts of interest do not compromise its analytical independence." Why, you might ask, could one not make a fraud claim based upon those statements? Because, the Second Circuit ruled, those statements were transparently not meant to be taken seriously.
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I point this out because the ratings agencies' responses to the questions we posed for the piece were almost as revealing as the extremely damaging emails and internal documents the Robbins Geller lawyers uncovered. It wasn't just that there was apparently an entire generation of internal email correspondence that had been taken out of context (apparently, the context was taken out of context). More interesting was another line of defense. Not long before I contacted them, S&P had made, in a very graphic and comical manner, a very strange argument in court. In an attempt to dismiss a federal Justice Department lawsuit pending against S&P, the company had, in a court motion, cited a Florida court case, Boca Raton Firefighters and Police Pension Fund v. Bahash. In that case, the Second Circuit ruled that the plaintiffs suing S&P could not make a fraud claim based upon the company's reassurances in its Code of Conduct of its "objectivity, integrity and independence."
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Anyway, if you want the full lowdown on what actually goes on internally at these companies, check out the piece, which is full of the devastating material dug up by those San Diego lawyers. Also, thanks so much to the excellent Chris Hayes at MSNBC, who had me on last night to discuss the issue. It was a very fun talk.