Credit Agencies Deny Inflating Ratings to Beat Rivals, Senate Told

The Independent (London, England), September 27, 2007 | Go to article overview
Save to active project

Credit Agencies Deny Inflating Ratings to Beat Rivals, Senate Told


By Stephen Foley in New York

The two biggest credit rating agencies denied that they gave inflated ratings to sub-prime mortgage debt and other discredited bonds in order to attract more lucrative business from Wall Street banks.

The defence of their agencies' role in the credit crisis came as executives were hauled over the coals by US lawmakers on Capitol Hill, who said the agencies were riddled with conflicts of interest and should shoulder much of the blame for inflating a bubble in the credit markets.

Executives from Standard & Poor's and from Moody's appeared yesterday before the powerful Senate banking committee, one of several bodies investigating the rating agencies' role as arbiters of the creditworthiness of the mortgage-backed bonds created by Wall Street banks in record numbers.

Home loans taken out by low-income Americans have been parcelled up and used to back exotic new debt instruments, many of which were given credit ratings equivalent to US government bonds - suggesting they were practically guaranteed never to default. As millions of borrowers got into arrears, however, the bonds have all collapsed in value, causing global disruption.

At the heart of the controversy is the fact that it is the Wall Street banks that pay the agencies to rate the new products. One after another, Senators accused the agencies of giving artificially high ratings to ensure that the business did not go to their rivals.

Senator Jim Bunning, a Republican from Kentucky, described the process as "like a movie studio paying a critic to review a movie and then using a quote from his review in the commercials".

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Credit Agencies Deny Inflating Ratings to Beat Rivals, Senate Told
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?