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6. Moody’s Investors Service and Standard and Poor’s adjusted the way they graded securities after Goldman...

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Finance

6. Moody’s Investors Service and Standard and Poor’s adjustedthe way they graded securities after Goldman Sachs Group Inc., UBSAG and at least six more banks pressured them, according to a U.S.Senate report. “The world’s two largest bond-ranking companies madeexceptions to rules when bankers asked for better safety ratings oncomplex mortgage-backed securities, the Senate PermanentSubcommittee on Investigations said yesterday. When Moody’s andS&P changed their assessments of hundreds of those bonds inJuly 2007, it helped trigger the financial crisis, the panel said.The ratings agencies weakened their standards as each competed toprovide the most favourable rating to win business and greatermarket share,” according to the report. This occurred in 2007 andwas in part responsible for the Global Financial Crisis – discussin class.

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Rating Agencies are like watchdogs The fiduciary responsibility of the Rating agencies stems from the fact that they receive the data on the portfolios Now ratings are a necessity for an instrument to be listed or in simple terms accepted by the investors and or the markets Its a due diligence of a kind on an investment grade paper basis which the Banker sells the paper or instrument to the investors thereby transferring the risks and rewards of discounted interest and principal cash flows being accrued by the underlying assets loans against securities which is mortgage in this    See Answer
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