Ratings Company has to pay $130 million over mortgage bonds

[FillJackson]

Moody's Corp. will pay $130 million (http://www.latimes.com/business/la-fi-calpers-moodys-settlement-20160309-story.html) to the California Public Employees' Retirement System to settle allegations that the ratings agency acted negligently by giving top scores to ultimately toxic investments that cost the pension fund hundreds of millions of dollars, CalPERS said Wednesday.

CalPERS sued Moody's and rival ratings agencies Standard & Poor's and Fitch in 2009, saying the agencies gave AAA ratings -- which imply extremely low risk -- to bonds backed by subprime mortgages.

CalPERS, the nation's largest public pension fund, put $1.3 billion into those bonds in 2006, at the height of the subprime-fueled housing boom. When the bonds went bad in the ensuing crash, the fund estimates it lost as much as $1 billion, according to court filings.

In those filings, CalPERS said the ratings agencies' opinions of the bonds "proved to be wildly inaccurate and unreasonably high," and that the methods the agencies used to rate the bonds "were seriously flawed in conception and incompetently applied."

With today's settlement, plus a $125-million deal reached with S&P last year, CalPERS' total settlements related to the $1.3-billion bonds investment stand at $255 million.

Good. The ratings agencies were a giant cause of the financial crisis. Without the AAA ratings on CDO's, there never would have been a rush to create as many mortgages as possible because they would have been able to sell the mortgage bonds

[FillJackson]

Lots of investors like CalPERS have to invest in highly secure investments, so putting AAA ratings on a CDO was like giving the bank a license to print money. It was an absolute no brainer to sell the AAA parts of these piles of securities.

[DonDadda59]

Only a fraction of what they lost but better than nothing.

But what we really need is LESS regulation of the financial sector. :applause:

[fiddy]

Only a fraction of what they lost but better than nothing.

But what we really need is LESS regulation of the financial sector. :applause:
:roll: :roll: :roll:

[FillJackson]

Only a fraction of what they lost but better than nothing.

But what we really need is LESS regulation of the financial sector. :applause:
Yeah, when people say the government caused the crisis they almost never mention how the regulators failed to do their jobs.

There were mid level officials at some of the regulators who said the political appointees would never let them bring the cases they wanted and they explicitly fought against State regulators going after predatory lenders.

White House Philosophy Stoked Mortgage Bonfire (http://www.nytimes.com/2008/12/21/business/21admin.html)
When states tried to use consumer protection laws to crack down on predatory lending, the comptroller of the currency blocked the effort, asserting that states had no authority over national banks.

The administration won that fight at the Supreme Court. But Roy Cooper, North Carolina’s attorney general, said, “They took 50 sheriffs off the beat at a time when lending was becoming the Wild West.”

The president did push rules aimed at forcing lenders to more clearly explain loan terms. But the White House shelved them in 2004, after industry-friendly members of Congress threatened to block confirmation of his new housing secretary.

also this
Today, the White House cites that report — and its subsequent effort to better regulate Fannie and Freddie — as evidence that it foresaw the crisis and tried to avert it. Bush officials recently wrote up a talking points memo headlined “G.S.E.’s — We Told You So.”

But the back story is more complicated. To begin with, on the day Mr. Falcon issued his report, the White House tried to fire him.

At the time, Fannie and Freddie were allies in the president’s quest to drive up homeownership rates; Franklin D. Raines, then Fannie’s chief executive, has fond memories of visiting Mr. Bush in the Oval Office and flying aboard Air Force One to a housing event. “They loved us,” he said.

So when Mr. Falcon refused to deep-six his report, Mr. Raines took his complaints to top Treasury officials and the White House. “I’m going to do what I need to do to defend my company and my position,” Mr. Raines told Mr. Falcon.

Days later, as Mr. Falcon was in New York preparing to deliver a speech about his findings, his cellphone rang. It was the White House personnel office, he said, telling him he was about to be unemployed.

His warnings were buried in the next day’s news coverage, trumped by the White House announcement that Mr. Bush would replace Mr. Falcon, a Democrat appointed by Bill Clinton, with Mark C. Brickell, a leader in the derivatives industry that Mr. Falcon’s report had flagged.