What to say?
How much evidence will still be required …
Will the last drop lead to a sudden awareness and push Humankind into cooperative deconstruction of what is perverse and unsustainable in our present world system and construction of what all will accept as a dignified way of living to ensure the sustainability of the World and Humankind
Will the last drop lead to destructive revolutions, wars, conflicts, ecological disasters… leading our future generations to exhaustion (if not to extinction)
What prevents us to dialogue, to understand each other, to empathically accept each other’s viewpoints, beliefs, inferences, blind spots…so as to build solutions, however clumsy they may like, but solutions that everyone can live with, because everyone has been listened to, and everyone has been accounted for…
What do we need to belief this can happen, and that we can avoid disaster?
As Einstein warned us: ” Problems cannot be solved by the same level of thinking that created them”
How will we learn, collectively, to think differentlly, from a higher level of awareness?
MOODY’S ANALYST BREAKS SILENCE: Says Ratings Agency Rotten To Core With Conflicts
A former senior analyst at Moody’s has gone public with his story of how one of the country’s most important rating agencies is corrupted to the core.The analyst, William J. Harrington, worked for Moody’s for 11 years, from 1999 until his resignation last year.
From 2006 to 2010, Harrington was a Senior Vice President in the derivative products group, which was responsible for producing many of the disastrous ratings Moody’s issued during the housing bubble.
Harrington has made his story public in the form of a 78-page “comment” to the SEC’s proposed rules about rating agency reform, which he submitted to the agency on August 8th. The comment is a scathing indictment of Moody’s processes, conflicts of interests, and management, and it will likely make Harrington a star witness at any future litigation or hearings on this topic.
The primary conflict of interest at Moody’s is well known: The company is paid by the same “issuers” (banks and companies) whose securities it is supposed to objectively rate. This conflict pervades every aspect of Moody’s operations, Harrington says. It incentivizes everyone at the company, including analysts, to give Moody’s clients the ratings they want, lest the clients fire Moody’s and take their business to other ratings agencies.
Moody’s analysts whose conclusions prevent Moody’s clients from getting what they want, Harrington says, are viewed as “impeding deals” and, thus, harming Moody’s business. These analysts are often transferred, disciplined, “harassed,” or fired.
In short, Harrington describes a culture of conflict that is so pervasive that it often renders Moody’s ratings useless at best and harmful at worst.
Harrington believes the SEC’s proposed rules will make the integrity of Moody’s ratings worse, not better. He also believes that Moody’s recent attempts to reform itself are nothing more than a pretty-looking PR campaign.
We’ve included highlights of Harrington’s story below. Here are some key points:
- Moody’s ratings often do not reflect its analysts’ private conclusions. Instead, rating committees privately conclude that certain securities deserve certain ratings–but then vote with management to give the securities the higher ratings that issuer clients want.
- Moody’s management and “compliance” officers do everything possible to make issuer clients happy–and they view analysts who do not do the same as “troublesome.” Management employs a variety of tactics to transform these troublesome analysts into “pliant corporate citizens” who have Moody’s best interests at heart.
- Moody’s product managers participate in–and vote on–ratings decisions. These product managers are the same people who are directly responsible for keeping clients happy and growing Moody’s business.
- At least one senior executive lied under oath at the hearings into rating agency conduct. Another executive, who Harrington says exemplified management’s emphasis on giving issuers what they wanted, skipped the hearings altogether.
Given this, we expected Moody’s might want to share its side of the story–or denounce Harrington as a disgruntled ex-employee. Instead, Moody’s did not return multiple calls seeking comment.