Mr Cooper Group Inc (COOP)

[Dragynn]

Did Moody's get paid to downgrade Wamu?

A follow-up to the news story I posted yesterday, note the parts I have highlighted. Again, if Moody's was a part of the colluding (illegal) effort to take down Wamu, then that would open them up to liability for damages, and be further proof of JPM/FDIC's guilt.

It's important to remember, that while a simple assessment of assets/liabilities definitely has some validity here, the potential for a huge settlement/payoff, is to be found in the potential damages due to WMI and it's shareholders stemming from the illegal and unethical actions of JPM, the FDIC, and now perhaps Moody's.

And with a 722 million verdict already against JPM, and the recent verdict of 300 million to a SINGLE INDIVIDUAL in a suit vs. big tobacco, it seems plain, that judges and juries, intend to make some defining statements with regard to corporate responsibility.
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Analysts question SEC as credit agencies' policeman


http://www.reuters.com/article/ousivMolt/idUSTRE5AJ3UM20091120?sp=true

By John Parry - Analysis

NEW YORK (Reuters) - Credit rating agencies' blunders in the global credit crisis highlight the need for more effective regulation, but the Securities and Exchange Commission may not prove an effective policeman, market analysts say.

Investors have blamed rating agencies, Moody's Corp (MCO.N), Standard & Poor's (MHP.N) and Fitch Ratings (LBCP.PA), as well as regulators, for the role they played in the global financial crisis. The top ratings that agencies assigned to toxic securities contributed to the severity of the market meltdown and the Obama administration wants to give the SEC more power to rein them in.

Many analysts believe the ratings model the big three agencies use is inherently flawed and susceptible to conflicts of interest because the issuer pays them to rate their products.

Key lawmakers agree that the SEC should write and enforce rules for the credit rating agencies and have proposed setting up an office within the SEC to do just that.

But experts are not convinced the SEC is up to the task, not least because of its catastrophic failure to spot Bernard Madoff's $65 billion Ponzi scheme despite red flags and complaints.

"You want to convince me that the agency which allowed Madoff to run a giant Ponzi scheme could improve on what the credit agencies do?" said Zvi Bodie, a finance professor at Boston University's School of Management.

The SEC had no comment.

Some analysts argue that the commission also did not make sufficiently transparent to investors the excessive risk-taking at some now-defunct investment banks, whose demise brought the global financial system to the verge of collapse.

"Non-banks were generally regulated by the SEC, so one might argue that even things like investment banking problems at Bear Stearns, Lehman and insurance companies might have fallen closer to the SEC umbrella than the Fed's umbrella," said Ray Stone, economist with Stone & McCarthy Research Associates, in Princeton, New Jersey.

Others say the SEC's existing resources are overstretched and that it is underfunded and understaffed for a regulator of such broad scope.

Bodie and other academics argue that the SEC's chief weakness as a regulator of securities is that the commission is heavily staffed with lawyers and lacks financial expertise.

To supervise credit rating agencies effectively, the regulator first would have to hire new people from banks and the agencies themselves who understand how to assess securities, analysts say. That task will take time.

"The SEC would have to get some knowledgeable people in there who used to work at the rating agencies. You would have to create a whole new bureaucracy to do this," said Richard Sylla, economics and financial institutions professor with New York University's Stern School of Business.

To be sure, policing the rating agencies is no easy task.

A former Moody's analyst said in September that the company knowingly assigned incorrect ratings to a security as recently as this year.

In late September, a now suspended managing director at Moody's testified that the agency's senior managers still favor revenue over ratings.

Moody's stated that it "takes seriously all allegations of potential impropriety."

The SEC formally gained oversight of the big three credit rating agencies through a 2007 law designed to increase competition in the industry.

The new authority came too late for the SEC to prevent the formation of a speculative bubble in obscure financial instruments such as Collateralized Debt Obligations. Top AAA ratings from the agencies helped to inflate the bubble, which popped when investors realized the securities were toxic.

Some analysts say the SEC made other missteps ahead of the global financial crisis in areas that were arguably within its domain. For example, the SEC was responsible for ensuring clearer disclosure for investors in the financial statements of investment banks, Stone said.

The SEC has adopted a flurry of rules to crack down on potential conflicts of interest and increase disclosure.

Congress is also scrambling for ways to ensure that rating agencies are more accountable for their grades. Bills in the House and Senate would give investors an easier way to sue the agencies if they knowingly and recklessly failed to investigate or obtain analysis from an independent source.

The regulator is also making a big push to hire experts with Wall Street experience and is beefing up its office of assessment. But not everyone thinks that by hiring people from the agencies, the SEC will improve its oversight in this area.

"If I hire all those analysts, I hire the people who missed the last time," said George Feiger, chief executive of Contango Capital Advisors in Berkeley, California.