Lawmakers Blame Execs for Meltdown

October 22, 2008— -- Angry lawmakers from both parties assailed the top dogs of the big three credit rating companies Wednesday morning, assigning severe blame for the financial crisis on their firms' failure to assess the risk of trillions in subprime-mortgage related investments.

"You're the gatekeepers, you're the guys," chided a visibly frustrated Rep. Elijah Cummings, D-Md. "You're the ones who make all the money. That's why you're there. Now we face a situation where we've got a house of cards that has fallen, and here we are trying to resurrect it."

"The story of the credit rating agencies is a story of colossal failure," Rep. Henry Waxman, D-Calif., chair of the House Oversight and Government Reform Committee told the men who appeared before his committee this morning. "The result is that our entire financial system is now at risk."

The top executives – Moody's Corporation CEO Raymond W. McDaniel, Standard & Poor's president Deven Sharma, and Fitch Ratings' president and CEO Stephen Joynt – said in prepared statements that the meltdown of mortgage-backed securities was "unanticipated" and "unprecedented."

"It's clear greed led to not just, 'see no evil, hear no evil,' but 'report no evil,'" charged Rep. Mark Souder, R-Ind. "I believe there is possible legal culpability."

Rep. Dennis Kucinich, D-Ohio, agreed, calling the situation "criminal."

Rep. Chris Shays, R-Conn., charged the firms, which took fees from the investment banks which were packaging and selling the mortgage-backed securities they were rating so highly, had "sold their independence to the highest bidder."

Confidential documents obtained by Waxman's investigators show that the firms' executives anticipated much of what has happened, and were aware that their ratings were quite possibly shaky, according to the chairman.

"It could be structured by cows and we would rate it," one Standard & Poor's employee wrote in a company email cited by Waxman. "Let's hope we are all wealthy and retired by the time this house of cards falters," wrote another in an email obtained by Waxman's committee.