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Sec Probe Of Raters Reveals Conflicts In Grading Debt

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July 8 (Bloomberg) -- A U.S. Securities and Exchange Commission investigation into credit-rating companies found the firms improperly managed conflicts of interest and violated internal procedures in granting top rankings to mortgage bonds.

A 10-month review of Moody's Investors Service, Standard & Poor's and Fitch Ratings found instances in which analysts contributed to fee discussions and weighed the likelihood they would lose clients if they issued certain ratings, the Washington-based SEC said in a report released today. Employees also cast doubt on the quality of some ratings, the SEC said.

``We uncovered serious shortcomings at these firms,'' SEC Chairman Christopher Cox said today at a news conference. ``When there were not enough staff to do the job right, the firms sometimes cut corners.''

Pension and money-market funds bought AAA-rated securities backed by mortgages made to the riskiest borrowers because they offered higher returns than government bonds with the same ratings. In many cases, credit raters were paid by investment banks selling the bonds, prompting regulators and lawmakers to question their independence.

The SEC report details an e-mail in which an analyst at an unidentified credit-rating company refers to the market for collateralized debt obligations as a ``monster.''

I think a class action lawsuit needs to be brought. If the debts has been given a truthful rating banks wouldn't have been able to leverage more loans against it.

The system has clearly contributed to current problems and helping to unleash inflation.

Laissez faire economics quite clearly doesn't work. But as always while everyone is rolling in profit the authorities don't care as the all important political donations may dry up.

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  • 399 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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