Politics

Oversight Committee Hearing on Credit Rating Agencies and the Financial Crisis

By Karina

Today, the Oversight Committee is holding a hearing examining the actions of the three largest credit rating agencies (Standard & Poor?s, Moody?s Corporation, and Fitch Ratings) leading up to the current financial crisis. ABC News reports:

The top dogs of the big three credit rating companies made $80 million in compensation while their firms gave bogus high ratings to trillions in dubious mortgage-related investments which led to the world’s current financial meltdown — and a hearing before bitter lawmakers on Capitol Hill Wednesday morning.

“The story of the credit rating agencies is a story of colossal failure,” Rep. Henry Waxman, D-Calif., chair of the House Oversight and Government Reform Committee will tell the men when they appear before his committee this morning, according to a draft of his prepared comments. “The result is that our entire financial system is now at risk.”

The top executives ? Moody’s Corporation CEO Raymond W. McDaniel, Standard & Poor’s president Deven Sharma, and Fitch Ratings’ president and CEO Stephen Joynt ? are expected to say the meltdown of mortgage-backed securities was “unanticipated” and “unprecedented.”

But confidential documents obtained by Waxman’s investigators show that the firms’ executives anticipated much of what has happened, and were aware that their ratings were quite possibly shaky, according to the chairman.

“It could be structured by cows and we would rate it,” one Standard & Poor’s employee wrote in a company email cited by Waxman. “Let’s hope we are all wealthy and retired by the time this house of cards falters,” wrote another in an email obtained by Waxman’s committee.

The following witnesses are expected to testify:

Jerome Fons, former executive, Moody?s Corporation
Frank Raiter, former executive, Standard & Poor?s
Sean Egan, Managing Director, Egan-Jones Ratings
Deven Sharma, President, Standard & Poor?s
Raymond W. McDaniel, Chairman and Chief Executive Officer, Moody?s Corporation
Stephen Joynt, President and Chief Executive Officer, Fitch Ratings

Watch a live webcast of the hearing>>

Read Chairman Waxman’s opening statement>>

Read prepared testimony and supporting documents:

Testimony of Jerome Fons (91 KB)
Testimony of Frank Raiter (161 KB)
Testimony of Sean Egan (70 KB)
Confidential Presentation to Moody’s Board of Directors, October 2007 (268 KB)
Revenue of Big Three Credit Rating Agencies: 2002-2007 (14 KB)
E-mail from Belinda Ghetti to Nicole Billick, et al., December 16, 2006 (298 KB)
E-mail from Frank Raiter to Richard Gugliada et al., March 20, 2001 (377 KB)
E-mail from Mary Elizabeth Brennan to Moody’s Subprime Working Group, July 11, 2007 (253 KB)
E-mail from Raymond McDaniel to Mark Almeida, July 13, 2007 (83 KB)
Instant Message Conversation between Shannon Mooney and Ralul Dilip Shah, April 5, 2007 (105 KB)
Moody’s Town Hall Transcript, September 2007 (4 MB)
E-mail from Yo-Tsung Chang to Joanne Rose, et al., May 25, 2004 (129 KB)

Full post as published by The Gavel on October 22, 2008 (boomark / email).