Was there consequences the over-rating the junk mortgages?

A lot of the recent financial problems was blamed on bad mortgage bundles that were incorrectly rated as low risk.

Did the companies that put out those ratings suffer any negative consequences as a result of these erroneous ratings?


Warren Buffet, head of Berkshire Hathaway, which owns a chunk of Moody’s, had to endure some uncomfortable Congressional testimony.

Since Mid 2007, Moody’s has underperformed the S&P500. Since Mid-2007 McGraw Hill, owner of S&P, has also underperformed the S&P500. (The S&P is down about 25%, McGraw-Hill is down 50%, Moody’s is down 60%. Moody’s Beta is 1.26, so this seems to reflect a more general shock). I suspect that this is due to uncertainty with regards to future regulation.

Currently, bond issuers choose the raters and pay for the ratings, which creates an obvious conflict of interest. Al Franken proposed an amendment which would address this: raters would stay in business, but the SEC would decide who rated what. That amendment was [del]buried[/del] tabled for additional study(by the SEC, admittedly). OTOH, the Senate agreed to remove the liability exemption for credit rating agencies, which was a win for the lawyers and a lose for the raters.