Rather than assess risk accurately, two major rating agencies sold their top seals of approval to their investment bank clients, blessing products that the agencies themselves knew to be undeserving, the Senate Permanent Subcommittee on Investigations concluded in a report released Wednesday. By repeatedly debasing their standards, these agencies helped banks sell shoddy securities to unsuspecting investors, inflating the value of assets that turned out to be worth far less, the report has found.
The senate panel, led by Carl Levin (D-Mich.) and Tom Coburn (R-Okla.), levels a two-part charge against the rating agencies: Not only did these companies help inflate a dangerous bubble, the report says, but they also bear responsibility for popping it, as their abrupt downgrades of mortgage-linked securities in 2007 helped set off the panic that caused markets around the world to collapse.
These downgrades, the report says, were the "most immediate trigger" to the financial crisis, forcing a parasitic financial apparatus of lenders, regulators, rating agencies and investment banks to reckon with the weak economic underpinnings of its profits. The basic outline of this catastrophe has been widely reported, but Wednesday's release presents in vivid detail the roles of the key players, including those of Moody's Investors Service and Standard & Poor's Financial Services, the two leading rating agencies.
Like the banks they served, these two rating agencies focused on short-term profits above the integrity and long-term health of their institutions, a trove of internal documents uncovered by the Senate panel show.
Oh right, I remember now - I think that is commonly referred to as fraud, or at least that's what it is referred to in circles outside of Wall Street and DC. It's more or less the cost of doing business for banksters, as is noted in the NY Times this week as they again highlight that not one criminal prosecution of prominent financial executives has taken place since the financial crisis began. But you know, prosecuting white collar crime is "hard," and the FBI has terrorism to worry about and stuff. It's really a matter of priorities; there has not been any significant prosecution of these individuals because the Justice Department does not want to prosecute and does not give a shit sufficiently enough to allocate the necessary resources. One witnessed a very different situation following the savings & loan crisis of the 1980s:
But several years after the financial crisis, which was caused in large part by reckless lending and excessive risk taking by major financial institutions, no senior executives have been charged or imprisoned, and a collective government effort has not emerged. This stands in stark contrast to the failure of many savings and loan institutions in the late 1980s. In the wake of that debacle, special government task forces referred 1,100 cases to prosecutors, resulting in more than 800 bank officials going to jail. Among the best-known: Charles H. Keating Jr., of Lincoln Savings and Loan in Arizona, and David Paul, of Centrust Bank in Florida.
[...]
As the crisis was starting to deepen in the spring of 2008, the Federal Bureau of Investigation scaled back a plan to assign more field agents to investigate mortgage fraud. That summer, the Justice Department also rejected calls to create a task force devoted to mortgage-related investigations, leaving these complex cases understaffed and poorly funded, and only much later established a more general financial crimes task force.
It's just not a priority, and that won't be changing any time soon. This is the rule, not the exception. Glenn Greenwald expertly pointed out yesterday this flawed and pervasive double standard in the American justice system, one that extends well beyond the banksters. And let's not forget that while there have been no criminal prosecutions, there have similarly been no civil cases or sanctions either. The banksters and all their friends on Wall Street made billions fucking over the country and the global economy. They continue to lavish even larger bonuses and compensation upon themselves. And all of this is going on while millions are foreclosed upon or struggle to keep their homes, and our government subjects them to bullshit lobbyist/bankster-written programs (like HAMP) before they are entitled to any remediation or aid. Because as I have said before, we don't want to throw good taxpayer money after bad, or reward unscrupulous or irresponsible individuals. As with our justice system, the state is only interested in siding with you or lending extraordinary economic aid if you are a plutocrat.
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