October 23, 2008	Thursday	Shawwal 23, 1429

NEW YORK, Oct 22: The top executives of three big credit ratings companies based in New York who made as much as $60 million in compensation while their organisations gave bogus high ratings to trillions in dubious mortgage-related investments which led to the world’s current financial meltdown would be grilled by US congress on Wednesday, ABC news reported .

The top executives at Moody’s Corporation CEO Raymond W. McDaniel, Standard & Poor’s president Deven Sharma, and Fitch Ratings’ president and CEO Stephen Joynt are expected to say the meltdown of mortgage-backed securities was “unanticipated” and “unprecedented.”

“The story of the credit rating agencies is a story of colossal failure,” Congressman Henry Waxman, chair of the House Oversight and Government Reform Committee will tell the men when they appear before his committee on Wednesday, according to a draft of his prepared comments. “The result is that our entire financial system is now at risk.”

At all three ratings firms, profits in recent years have been among the fattest on Wall Street, Waxman is expected to note. One firm, Moody’s, rang up profit margins three to four times those of Exxon Mobil Corp. while assuring investors that complex mortgage-backed investments were safer bets than they really were, according to Bloomberg News.

In recent financial filings noted by the investor web blog Footnoted.org, however, Moody’s confirmed it had “errors in the model” it used to rate some investments, and is “cooperating with. . . investigations and inquiries” by “states attorneys general and other governmental authorities,” including the Securities and Exchange Commission.

Two former rating company employees who took the issue with their firms’ practices are also slated to testify on Wednesday, according to the panel.

But confidential documents obtained by Waxman’s investigators show that the firms’ executives anticipated much of what has happened, and were aware that their ratings were quite possibly shaky, according to the chairman. “It could be structured by cows and we would rate it,” one Standard & Poor’s employee wrote in a company email cited by Waxman. “Let’s hope we are all wealthy and retired by the time this house of cards falters,” wrote another in an e-mail obtained by Waxman’s committee.

As Moody’s CEO McDaniel explained in an October 2007 presentation obtained by Waxman’s staff, shaky ratings came because few of the players — investors, banks or the firms which issued the securities — truly want an accurate assessment of an investment, if it isn’t going to be good news.

“Ratings quality has surprisingly few friends,” he observed.