Standard & Poor's/Moody's

[firstsource]

One of the many things about this housing crisis that I don't understand is this.

Most everyone knows that these two companies sell information that is necessary to the investment world to assess risk. These companies rate bonds so that buyers know what risk is involved. For instance, if you want to invest in a bond of a company that makes computer parts, they rate the bond so the investor can tell the likelihood they will get their monthly dividends and the total return on their investment.

For the past 2 years both of these organizations have given the same rating to all mortagage backed securities/bonds. In other words a pool of 50 million loans made up of good conforming loans was given the same basic ratings as pools of sub-prime loans. This was saying to the marketplace that all borrowers were about the same/chances were the same that someone with a 580 mid score was going to pay at the same rate as someone with a 720 score (the nations median credit score).

These ratings were totally bogus. No wonder sub-prime borrowers were paying only about 1% more in interest than top/conforming borrowers. Places like New Century etc were just making a lot of extra profit for not much extra work (Sub-prime were always manually underwritten, whereas conforming have always been underwritten with automated underwriting systems.

Why has no one called these companies to task?

Hope someone has an answer.

Charles