When the really true history of the financial collapse is written there will be a special place of infamy for the three major rating agencies: Moody's, S & P, and Fitch. I'd written about them before the system-wide disaster and during the weeks and months when American capitalism was truly on the ropes. Some sectors of the economy got their comeuppance; some didn't, getting away wholly unpunished and gloating about their escape by claiming that their lies about companies and public bonds were protected by the First Amendment. Free speech has insulated many rogues and criminals. But I don't think it has ever worked with such surety to make some people very rich and some people very poor.
I've been meaning to write about a probing book titled Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. The book was written by Christine S. Richard of Bloomberg News and is about Bill Ackman and Pershing Square Management. Bill is an old student and friend, and I sit on Pershing's board. I was marginally involved in the struggle that Bill waged against MBIA, taking its stock price down over a six year time span from in the high double-digits to, well, almost nothing. In the interim, as it happens, the big three in the ratings business couldn't find ratings high enough for these culprits of run-away capitalism. Well, Moody's has gotten away once again with its old tricks. The story is told in this morning's Wall Street Journal and New York Times. But the headline over the Financial Times piece tells us all that we need to know: "US watchdog drops probe into Moody's but warns rating agencies." These agencies are not stupid. If they weren't nabbed now, they will never be nabbed.