Different Acronyms, Same Disaster: Bond Ratings Are Once Again For Sale

By John Rubino | 30 December 2019

DOLLAR COLLAPSE — Of all the amazing scenes in The Big Short, a film about the genesis of the Great Recession, arguably the most shocking is the meeting between a couple of hedge fund managers trying to understand the housing bubble and “Georgia,” a (in a bit of symbolic overkill) visually-impaired executive with the Standard & Poor’s bond rating agency.

Beginning at the 2:15 mark in the following video clip, the money managers demand to know why she’s handing out AAA ratings to clearly high-risk mortgage backed paper. To which she responds,

“If we don’t give them the ratings they’ll go to Moody’s, right down the block. If we don’t work with them they’ll go to our competitors. Not our fault, it’s simply the way the world works. It is not my decision. I have a boss.”

The rating agencies’ blatant corruption contributed to one of history’s biggest bubbles and the subsequent multiyear financial crisis. But at least it taught those guys a valuable lesson and led to changes that will prevent a recurrence.

Just kidding. […]

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