It becomes increasingly obvious each day that it is “business as usual” for the U.S. financial crime syndicate. Bankster “bonuses” have returned to their obscene levels. Most of the “too-big-to-fail” banks have actually been allowed to get bigger. And ratings-fraud continues unabated with respect to the so-called “credit rating” agencies.
In fact, these companies are not even worthy of their own labels. As a reminder to readers, these companies admitted (shortly after the U.S. housing-bubble burst) that they never even hired enough staff to rate the increasingly convoluted “toxic” securities being crankedout by the Wall Street fraud-factories.
This is only one of the outrageous aspects of this obvious scam. Ratings agencies are paid by the sellers of these products. Thus, the ratings agencies don't even pretend to independently evaluate these products,which, of course, is the primary function of these companies. The companies selling these products have to explain to the ratings agency how they should value them. If a particular ratings agency doesn't supply the appropriate “rubber-stamp” for the toxic security in question, then they don't get any future business.
It is a scam which is openly fraudulent, yet nothing has been done. Ratings agencies are still being paid by the sellers of these fraudulent securities. They still haven't even hired enough staff to evaluate the products they are “rating.” And government “regulators” still turn a blind eye to this institutionalized fraud.
Now someone within one of these ratings agencies is speaking out against this fraud. Eric Kolchinsky, an employee of Moody's Investors Service, has gone public with his accusations of fraud, supplying a list of examples. In one of those examples, from earlier this year, Moody's supplied a Wall Street financial product with a “high rating” even though it had already decided to downgrade the assets which “backed” this security (according to a Reuters article). Kolchinsky will now testify before the U.S. Congress, which is likely a waste of time – since Congress also acts as a rubber stamp for Wall Street.
There can be no excuse for not having already ended one of Wall Street's most flagrant forms of fraud, since the reforms which are absolutely necessary are obvious. First of all, these ratings agencies must be banned from taking fees from the sellers of these products. As I have pointed out before, the term “conflict of interest” appears to have no meaning in U.S. society. There is obviously no independence (and thus no value) to these “ratings” when these companies are nothing but Wall Street shills.
Obviously, this system must be reformed so that it operates in the same manner in which it initially operated: where the investors pay to have these products rated (hence the name “Moody's Investors Service”). The ratings agencies' complaint that fees from investors are not adequate to cover their “costs” for this service have no merit. Even with these companies taking their fat fees directly from Wall Street, they don't even attempt to independently evaluate these products.
The follow-up complaint from the ratings agencies: that these products are so complicated that it is impractical to independently evaluate them also has no merit. Obviously, if a product is too complicated to be rated, it simply gets labeled “unrated” - since this is the truth. How can a complex security get an “AAA” rating when the ratings agency has absolutely no idea of the true value (and true risk) of a product?
Naturally, the Wall Street banksters will whine with outrage at the idea of selling “unrated” financial products. They have no greater enemy than the truth. However, the idea that products that can't be independently rated must be labeled “unrated” is a tautology which is beyond debate.
The result of slapping “unrated” labels on these products is that investors won't buy them. This would force Wall Street to only sell financial products which can be understood (by both investors and ratings agencies). Obviously, this is a necessary development which should have already been completed.
The fact that both the ratings agencies and the Wall Street fraud-factories insist that they can't even conduct their businesses without openly incorporating fraud into their business models is a clear indicator of how hopelessly corrupt the U.S. financial crime syndicate has become. It is yet another strong argument that the U.S. government should have simply abandoned Wall Street to drown in its own fraud and debts – and used its $10 trillion in hand-outs/loans/guarantees to have created a “brand-new” financial system (one not dependent upon fraud). Instead, all of this money has been wasted to do nothing more than perpetuate bankster-fraud – and increase the power of the Wall Street oligarchs.
Still, there is some hope. A U.S. court has already thrown out the “free speech” defense which the (so-called) ratings agencies have tried to use to protect their fraud scheme. As a result, these companies can be sued by investors for recklessly slapping “AAA” labels on financial products they don't even pretend to understand.
Unfortunately, this is a very slow process – and it will likely take at least a decade to sue these companies into oblivion. Until that day arrives, it is up to investors themselves to simply ignore the fraudulent/meaningless “ratings” on Wall Street financial products, and then decide if they really want to be so foolish as to buy unrated financial products from the worst scammers in the history of banking.