IT'S NOT ONLY A REGULATORY PROBLEM, IT'S ALSO

a cultural problem. The Wall Street banksters and their enablers simply failed to control their greed and let the bubble grow until it exploded. Changing the rules will do some good but we have to change the culture and that means barring thousands from Wall Street.

Where was Moody's board when top-rated bonds blew up?
By Kevin G. Hall | McClatchy Newspapers
Posted on Friday, April 2, 2010

WASHINGTON — As the bottom fell out of the housing market and complex mortgage-backed securities began tanking in 2007, a strange thing happened at Moody's Investors Service, one of the largest firms that rate bonds for the risks they pose to investors.

Moody's blue-ribbon board of directors stopped receiving key information from an internal committee that was supposed to keep the board informed of risks to the company, a McClatchy investigation has found.

Instead, the ad hoc risk-management committee suddenly disappeared, precisely at the time when the board and management should have been shifting to higher alert as the financial world began quaking.

When the global financial crisis deepened in 2007 and the integrity of bond ratings came under attack, the captains of industry on the Moody's board seldom asked tough questions, according to former Moody's executives who made presentations to the board.

That's important, because the legislation to overhaul financial regulation that's now moving through Congress aims to empower ratings-agency boards by requiring a direct line of communication between the company officials who police for risks and the boards. It's not clear whether that would have made any difference at Moody's.