Sleeping With the Enemy -- Rating Agency Conflicts Surface

'Stockholm Syndrome'

Levin's probe also found evidence that the rating agencies relied too heavily on the banks for information -- one rating agency staffer described the problem as "Stockholm Syndrome."

Additionally, analysts at the rating agencies shared their information and internal models with banks so freely that the banks were ultimately able to game the system. In other cases, banks hired former rating agency staffers to help structure deals specifically to secure triple-A ratings.

In 2005, Goldman hired Shin Yukawa, a ratings expert at Fitch. Yukawa would eventually work on the Abacus deals.

In at least one instance. a ratings executive at S&P pointed out, in an email from June 2006, the danger of getting too closely intertwined with Wall Street.

"... [T]he right thing to do is to educate all the issuers and bankers and make it clear that these are the criteria and that they are not-negotiable," the email said. "If this is clearly communicated to all then there should be no monthly questions. Screwing with criteria to 'get the deal' is putting the entire S&P franchise at risk -- it's a bad idea."

ABC News' Matthew Jaffe contributed to this report

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