Democracy, Capitalism and the Rating Agencies: Accused of Harming African-Americans and Latinos

“Negative Redlining” – marketing disproportionately to minorities – is the accusation being made against two of three leading Wall Street “ratings agencies”.  Ratings agencies, like Moody’s, S&P, and Fitch, are hired by bond issuers to rate a bond, i.e. to quantify the likelihood of the bond not being repaid, and thus give it a letter grade.  Because ratings agencies are paid by the issuers to do the rating, they are absolutely not independent of the process.  They obtain the information they use from the issuer and the higher the rating, the greater the profit to all Wall Street parties involved in the issuance.

The National Community Reinvestment Coalition in their legal complaint alleges that Moody’s and Fitch knew that the mortgages were designed to fail, though the rating issued did not reflect this.  The complaint indicates that Moody’s and Fitch knew that the payment terms were unfair and that the borrowers’ income levels were too low to support the expected future payments.

In my humble opinion, there are many parties to blame.  The ratings agencies have the deepest pockets, so the attorneys have started there.  If my memory serves, mortgage brokers and their agencies are regulated at the respective state level.  Mortgage products, thus, are also regulated at the state level, either directly or indirectly.  Thus, where were the government agencies with the responsibility?   Those issuing the mortgages should have been at risk too, with their own capital on the line.  The underwriters, in agreeing to represent the sale of the securitizations, should have a legal responsibility also.  The list is a lot longer than this one paragraph……

Who is ultimately responsible in the world of Sir Paulson, Sagely Bernacke, and Mz Nancy Pelosi?  The American Citizens!!!!!!!!!!!!!!  You and me and my mother and our cousins, our elementary school teacher and our doctors, etc.  are responsible.  It is now our problem.  I forget if this is the definition of democracy???? It is definitely not the definition of capitalism………………………

Share your thoughts…. What happens tomorrow is always dependent on what happens today…

Share the word, share your knowledge.  Help save America for its citizens.

Advertisements


%d bloggers like this: