Here's how this good but long article ends up:
The ratings agencies [Moody's, Fitch Ratings, and Standard & Poor's] and were under no legal obligation since technically their job is only to give an opinion, protected as free speech, in the form of ratings.
"As an analyst, I wouldn't have known there was a compliance function. There was an attitude of carelessness, of careless ignorance of the law. I think it is a result of the mentality that what we do is just an opinion, and so the law doesn't apply to us," [Eric] Kolchinsky [managing director of Moody's structured finance division in 2007] said.
Experts such as Columbia University's [John] Coffee think that Congress must impose some legal liability on credit rating agencies. Otherwise, they'll remain "just one more conflicted gatekeeper," and the process of pooling loans -- essential to the flow of credit -- will remain paralyzed and economic recovery restrained.
"If (credit) remains paralyzed, small banks cannot finance the housing demand. They have to take them (investment banks) these mortgages and move them to a global audience," said Coffee. "That can't happen unless the world trusts the gatekeeper."
By Kevin G. Hall
October 19, 2009 | McClatchy Newspapers
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