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posted by Fnord666 on Tuesday January 17 2017, @05:39AM   Printer-friendly
from the got-off-easy dept.

SputnikNews reports

Moody's Corporation will pay $864 million to settle federal and state claims that it gave misleading ratings to risky mortgage investments, leading to the subprime mortgage crisis in the US and to the Great Recession.

In the deal, announced January 13, the ratings agency will give $437.5 million to the Justice Department and $426.3 million to be divided among the 21 involved states and the District of Columbia.

The settlement does not come close to the hardship caused by the global crisis theirs and other ratings set into motion, of course. The US Financial Crisis Inquiry Commission found in 2011 that the 2008 mortgage crisis wiped out $11 trillion of American household wealth, Bloomberg notes.

"We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction," the conclusions in its final report read. [PDF]

[...] This crisis could not have happened without [Moody's, Fitch, and Standard and Poor's]. Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms.

Standard and Poor agreed to pay nearly $1.4 billion two years ago to settle similar allegations by the Justice Department, 19 states and the District of Columbia, Yahoo News reports. Moody's settled before a federal lawsuit was filed; Standard and Poor settled only after the US filed a $5 billion suit against them for fraud, Reuters points out.


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  • (Score: 0) by Anonymous Coward on Tuesday January 17 2017, @05:46PM

    by Anonymous Coward on Tuesday January 17 2017, @05:46PM (#454974)

    So a libertarian economy relies on reputation? I hadn't heard that one before, talk about a house of cards! How does it feel to endorse something so unsustainable? How does your brain rationalize these problems?

  • (Score: 2) by HiThere on Tuesday January 17 2017, @08:41PM

    by HiThere (866) Subscriber Badge on Tuesday January 17 2017, @08:41PM (#455050) Journal

    The thing is, a reputation based interaction policy works fine in a small enough group...say fewer than 25. It just doesn't scale. And when there's a strong power imbalance, the only thing that has a chance of working is something that redresses the balance. ... Except that one-on-one good intentions can handle even the power imbalance problem, but they scale even worse than reputation.

    --
    Javascript is what you use to allow unknown third parties to run software you have no idea about on your computer.
  • (Score: 1) by khallow on Tuesday January 17 2017, @10:55PM

    by khallow (3766) Subscriber Badge on Tuesday January 17 2017, @10:55PM (#455134) Journal

    So a libertarian economy relies on reputation? I hadn't heard that one before, talk about a house of cards!

    A classic example of such markets is the Hawala system [wikipedia.org]. From this paper [globalsecuritystudies.com]:

    its origins are not entirely clear, but it is believed to have been used first in the financing of long - distance trade in the early medieval period on trading routes such as the Silk Road, the Eastern Mediterranean and the Indian ocean. Hawala is mentioned in texts of Islamic jurisprudence as early as the 8th century. In South Asia, it appears to have developed into a fully - fledged money market instrument, which was only gradually replaced by instruments of the formal banking system in the first half of the 20th century.

    So here, we have a pretty important, reputation-based, trade system that is older than any government.