Investigation on financial crisis focuses on credit rating agencies

Lawmakers on Capitol Hill continued their investigations into the financial crisis, today examining the role of credit rating agencies. A Senate investigation found that credit rating agencies gave high ratings to risky securities and then failed to re-evaluate them even after discovering their rating models were inaccurate and outdated.  In an exchange with Senator Ted Kaufman, former Managing Director of Standard and Poor's Credit Market Services Frank Raiter suggested that employees who raised concerns were forced out.

“Senator, if you’ve been in business you know that the choices you face in a dilemma like this is that you can quit – if you have a family to support that might be a little bit tenuous – and some of us chose to do just that. I retired because I got tired of the frustration, but a lot of the analysts that left tried to fight the good fight. Many of them have subsequently been laid off and when you bang your head against the management wall and ask for the money and give them presentations and show them the benefits of the higher quality rating criteria and they come back and they say, but revenues will go down, you’re faced with just that choice: either you continue to work there and you fight or you quit.”

According to the Senate's 18-month long investigation, credit rating agencies like Moody's and Standard & Poor's issued ratings based on the drive for market share and to accommodate investment bankers. During the housing bubble, credit rating agencies brought in record profits, earning $6 billion in 2007 alone, according to the Senate's report.