Ratings Emails Show Concerns at Rating Firms Over Goldman’s Abacus Deals

The dead bodies keep surfacing. It’s now clear the ratings agencies, who were paid for impartial evaluations of Goldman’s Abacus and other CDO deals, had serious qualms. Here are a few sound bites from rating-agency e-mails quoted in today’s Wall Street Journal:

“Screwing with criteria to ‘get the deal’ is putting the entire S&P franchise at risk—it’s a bad idea.”

Another from August 2006 says raters have “become so beholden to their top issuers for revenue they have all developed a kind of Stockholm syndrome which they mistakenly tag as Customer Value creation.”

“Another S&P email regarding one Abacus deal says, ‘not only have these trades consumed tons of my time, but they have generated an enormous amount of stress since I’m the one that has to break the news that these trades are wrong … which makes us look like idiots.”

Even if Goldman wins the SEC lawsuit, the victory will be pyrrhic. And frankly, there are so many reports of bad behavior that everyone in finance will lose: Goldman, banks, ratings agencies, and hedge funds.

You know there’s a problem when ratings agencies use “Stockholm syndrome” in the same sentence as “Customer Value.”

Norb Vonnegut

About the author

Norb Vonnegut wrote 178 articles on this blog.

Do you ever feel the financial news makes no sense? Do stories leave you with more questions than answers? I created Acrimoney to discuss Wall Street’s behavior behind the headlines. As a veteran of a wealth management business that exceeded $1 billion in assets, I offer insight into the people and the “doings” that affect your money. I’ll start the discussion. But I hope you’ll jump in and say what you think.

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