I looked to see if anyone had posted Harrington’s letter, but couldn’t find anything. If someone sees it, drop a link in the comments and I’ll update the post.

Whether it’s for profit healthcare, our election process or financial industry. We couldn’t have designed worse, more corrupt systems if we had tried. (Well, actually lots of people who benefit from the corruption tried really hard :))

We need an intervention. Maybe the FSM would come down for an independent audit.

Found it!

It was a “public comment” to the SEC’s proposed rules for regulating ratings agencies. The whole comments page is here, and Harrington’s opus is here (pdf).

Here are some highlights of the letter:

MOODY’S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts

Might want to look at KO’s interview of Matt Taibbi yesterday regarding revolving door and document shredding at the SEC as part of our current problem.

http://www.youtube.com/watch?v=Yi_SWrXGTq4

“endorsing a race to the bottom”
___

The Rule of Gresham’s Law. Inevitable absent effective regulation.

Moody’s argues that RMBS committees could not have factored the collapse of real estate prices into their opinions, given that the scale of the collapse was both unprecedented and unforeseeable. This rationale is as unconvincing as it is disingenuous, for it pretends that Moody’s and other financial players were not designing and operating the conveyances that carried real estate prices to unsustainable levels in the first place. A roller coaster inexorably chugs up to stomach-turning heights before it hurtles downward, and both a carnival operator and a thrill seeker understand the nature of the ride’s operations.

The rationale of “who could know?” is wholly undone through even a cursory examination of the actions of Moody’s and other financial players in the structured finance sector. Moody’s and other financial players took care to protect their earning should the real estate bubble that they were ushering into the world subsequently collapse.

A delicious read.

Now let’s see who in the House and Senate pick up on this. What about the corporate media, you say? Betcha we’ll see a primo effort by the leaches to paint Harrington as a pariah.

Great catch and post, peterr. Thank you.

Yeah, but, of late, I’ve been losing more sleep over The Looming Soviet Menace.

Isn’t it?

It’s stunning, too, that a good deal of Harrington’s scorn is aimed at the proposed regulations that the SEC put forward. For example, from pdf p. 10:

Most of the Proposed Rules fail the acid test that had they been implemented in 2002, Moody’s would have developed durable opinions, particularly in the RMBS, CDO and SIV sectors, in the ensuing years. Rather, the opposite is true. Many of the Proposed Rules give still more license to the management of Moody’s to step-up its long-standing intimidation and harassment of analysts, to the detriment of opinion formation. The rationale seems to be that, as the fox did so well in guarding the previous henhouse, why not commission it to design a new one, enlist it to take the daily beak count and designate it Hen’s Delegate to the U.S. Poultry Association?

The management of Moody’s, the management of Moody’s Corporation and the board of Moody’s Corporation are squarely responsible for the poor quality of previous Moody’s opinions that ushered in the financial crisis and should not be given first shot at debasing future opinions as well. Seriously, dudes, not for nothing, but something is way wrong with this picture. The phrase “bass ackwards” recurs. Please re-calibrate.

Emphasis added to show my favorite part so far. Needless to say, I like the way he writes.

Great graphic. If the woman were any denser she’d be a singularity.

Ha!

Thank You, Sir, May I Have Another?

Loves me Photoshop.

BTW, Jon Taplin has a good one going:

http://jontaplin.com/2011/08/18/savage-capital-ii/comment-page-1/#comment-72145

I’m surprised we can even see her.

Moody’s blew.

Pfffft! We see *way* too much of her.

Yay, punaise!

Wow Peterr – this piece paired with the Hudson piece over at Yves is just….damning.

If most Americans knew this info – well, raters wouldn’t be safe in their persons.

dontcha know!

Seems like everyone who acquires the standing to say, “Trust me,” immediately sets about finding ways to betray that trust. Or am I just overly gloomy today? I’m old enough to recall, with regret, that we used to have very different attitudes toward conflict-of-interest issues. BTW, if you have an “appearance of a conflict-of-interest,” as the lawyers like to say, then you have a conflict-of-interest. That’s what the term means. Duh.

good golly!

Thank you, Peterr.

Harrington’s letter is devastating for Moody’s, it is also clear, concisely powerful, and full of sharp wit.

As punaise says, “Moody’s blew”!

SD’s question of who will notice Harrington’s letter and what it lays out, is THE question for the monied elite, for CONGRESS, and as well, for everyone else.

Everyone should read the letter for insight into deliberate fail and intentional disaster.

It is an eye-opener and Congress needs to find it and questions about it piled high on their desks when they return from a “vacation” of schmoozing, glad-handing and misdirecting the people.

Talk about a smoking gun.

DW

You can bet on one thing… that Obama or his people will do everything they can to crucify this whistleblower too. Just watch.

Heh, that’s a sucker’s bet. Think of all the time the staff will spend trying to nail Harrington.

“Hello, Mr Harrington, we’re from the FBI.”

Same shit happened at Washington Mutual under the supervision of KKK (Kerry K. Killinger).

See the NYTimes article here:

http://www.nytimes.com/2008/12/28/business/28wamu.html?adxnnl=1&adxnnlx=1313865901-TWLvdEn6zD4NWmn2F7bu9Q

Hi, DW. In all honesty, anybody with the slightest interest in or knowledge of the financial markets knew many years ago that these raters were being paid by the very issuers whose securities they were, supposedly, objectively rating. That was really all any wordly person should ever have needed to know about the kinds of abuses that were inevitable in any situation so rife with conflict-of-interest issues.

BTW, slight OT, apologies, but I wrote my very first diary entry today, and I think it’s got a very good suggestion in it, so I hope some will read and recommend. Here it is: http://my.firedoglake.com/realitychecker/2011/08/20/fleshies/

Agreed, RC, yet how many American citizens (including members of Congress, who should) know much of anything about “markets” or our ham-fisted econoomic system? Harrington’s letter is a fine primer for ignorance, sloth, and willful deceit.

Lots of people did not learn in Kindergarten the things which they should.

And if they did, too many forgot, some to their great “profit” … but most to their great cost.

DW

Absolutely right, DW. Markets are complicated, and most chose to allow the broker class to become a priesthood of sorts. The financial industry spent billions in PR dollars to convince the public, over time, that they did not need to understand the details, and could instead rely on their friendly brokers to make them rich without risk or effort. An absurd proposition, on its face. Then the discount brokers spent billions to convince the common man that he could do it himself, again without any detailed knowledge. Remember the commercial for a discount broker that involved a huge yacht being towed thru Manhattan? Anyone who chose to explore the details rather than bask in the fantasies would have known the truth.

Exactly what I was thinking. Greenwald has been covering Obama’s savage attacks on whistleblowers. I hope more people like this come out. There is safety in numbers.

I find I am much in ageement with you, rc, and happily so.

Just visited your nifty new “place” and left a wee calling card, BTW.

;~DW

True, but that’s where Hudson’s piece is so valuable.

He notes the perverse incentives that lead the ratings agencies to skew their analysis of governments (cities, states, national) and quasi-government institutions in favor of those that follow policies that promote borrowing over raising taxes to pay for current expenses.

As the blockquote above states, “The effect of this inherent bias is not to give an opinion about what is economically best for a locality, but rather what makes the most profit for themselves.”

See S&P’s downgrade of the US credit rating. Sadly for S&P, the markets reacted by buying even more Treasuries, pushing the yields lower. Actual investors still apparently think the US government is the place to go for safety and stability.

Many thanks, DW. Just another reason to love you. ;-)

Yes, Peterr, I agree with you about the value of Hudson’s contribution. Very few think about that aspect of the situation that involves small governement entities and their regular financing activities. The more details that get out, the better, as a general rule. However, there are many other ways in which the corruption manifested itself, and some are of much greater magnitude and also more targeted against the weaker actors. The hundreds of trillions of dollars of derivatives securities, for example., which could never have flooded international markets without the seal of approval from the raters, who have admitted they did not know much about those derivatives. But they knew whom was paying them. Also, and to me the most unforgivable, the status of the raters was actually enshrined in statutes and regulations that required their AAA rating before many fiduciaries were allowed to invest in any securities. Most of these fiduciaries were investing for weaker, less knowledgeable players, which is why they were fiduciaries in the first place. In particular, investment portfolios to benefit pensions funds were among this latter group, so the corrupt and inaccurate ratings led directly to a raiding of the retirement money of many ordinary, hard-working individuals. Since at least the bond market raids of the 80′s, Wall Street has concentrated its greatest efforts in getting at the most conservative money. And they hit a home run in that effort with the collusion of the rating agencies. Finally, re the Treasury action following the downgrade, I am not convinced that will be a lasting dynamic, or that it is a direct consequence of the downgrade. It is clearly, in large part, a short-term trading reaction to the dismal recent economic data and a fear trade due to the European fears,and those factors are independent of the downgrade. The jury is still out on whether that downgrade was justified. Of course, sovereigns are among the small class of issuers that do not pay the raters directly for their services.

Yves Smith is hosting the Book Salon Chat with Gretchen Morgenson and Joshua Rosner right now.

But remember, while Moody’s was fraudulently rating derivatives packages that were packed with toxic mortgages, fraud-based ratings meant to fool investors into believing that these derivatives packages were better than they really were, the corrupt Bush administration was taking care of the toxic mortgage end of the investment scam of the century.

When state and local consumer protection officials (Republicans and Democrats) tried to apply state and local consumer protection laws to these predatory toxic mortgages being offered and signed by people excited to be homeowners, the Bush administration blocked these state and local consumer protection laws from being applied, finally taking it all the way to the U.S. Supreme Court, where Republican “Citizens United” justices sided with the corporate-owned corrupt Bush administration, effectively negating all consumer protection laws around the country in the process.

And the toxic mortgages and toxic derivatives packages continued until the end of 2008 when things collapsed under this heaping pile of toxic conservative waste.

Great comment, Oracle! I wonder if this Moody’s development will fortify Andrew Cuomo’s efforts??

What happened to the spotlight feature?