There are three names in Wall Street that represent the ultimate authority on the quality of any product of the financial community. They are called the rating agencies, and their names are Moody, Fitch, and Standard and Poor. The three have differing systems of ratings, but they generally run from AAA, the highest, to not rated, the lowest. The ratings have well defined parameters, which involve balance sheets, reserves, management, etc. The officers and underwriters of the giant investment banks are very familiar with these influencing factors, which they strive for in their clients. Key to the integrity of Wall Street is the integrity of the rating companies. Standard and Poor, Moody, and Fitch have failed in their obligation to be pristine in their honesty. Their corruption was exposed in the home mortgage scandal of 2008. For several years they had been giving their highest rating to bonds backed by home mortgages that had buyers who could not qualify and home values that were extremely overblown. As the watchdogs of Wall Street, these three bastions of integrity compounded their treachery and doubled down on corruption when they called the banks for the reserve required to justify the AAA rating they bestowed without the reserves.
In addition to this perfect Catch 22, there is the glaring fact of timing. Trillions of dollars of perfectly distributed American wealth were destroyed by declining home values. A Democrat Congress had sponsored and protected this destructive plan for eight years, so the odds are about one in a hundred that the timing was not rigged. It is impossible to believe that Moody, Fitch, and Standard and Poor, on the eve of a Presidential election, decided to look for reserves that they knew were not there.
Last week Fitch warned the world of the instability of US bonds, and that is the second from the infamous triumvirate. The warning is justified. The wonder is that anyone trusts the three any more or that they have courage, after their shame, to offer an opinion. With very few government regulations, Moody, Fitch, and S&P earned the trust of the world’s investing community. They betrayed us, squandering that trust forever. Shame on them.
For verification, see the documentary House of Cards.