Wednesday, August 15, 2007
Does this sound familiar? The Wall St. Journal reports on the role of the credit-rating firms in the subprime mortgage book by giving top ratings to many securities comprised of risky loans. In addition, the credit-rating firms actively worked with underwriters to design mortgage-backed securities that would receive high-enough ratings to be marketable. The rating firms, of course, were severely criticized when Enron/Worldcom imploded, for their failure to downgrade their bonds even as the companies were on the verge of bankruptcy. WSJ, How Rating Firms' Calls Fueled Subprime Mess .