Three good recent articles form the Times:
First, how Moody’s and other credit ratings agencies became part of the housing bubble.
Edmund Vogelius, a Moody’s vice president, explained the company’s business model in a 1957 article in The Christian Science Monitor.
“We obviously cannot ask payment for rating a bond,” he wrote. “To do so would attach a price to the process, and we could not escape the charge, which would undoubtedly come, that our ratings are for sale.”
These gentlemanly rules, which distilled much wisdom, were sacrificed for the almighty dollar. I’ve thought about this a lot. Milton Friedman and the Vienna School lived in the time where ethics and culture, and common sense would tell you a good ratings agency must remain independent from it’s clients. Certainly they must raise revenue, but they were able to do so without charging for ratings until the seventies. It may be the model to which they need to revert.
Chrysler’s friends in high places are working the ropes in DC to get bailed out, so that Cerberus can get a premium when they sell out to GM. This hot potato is going to land soon guys, get with it.
Also, Henry Cisneros and his role in guaranteeing cheap housing to people who can’t afford them…