Moody's Role In The Financial Crisis

2.

Moody's actions have caused affected just about everyone involved. However, some are more affected than others. His actions benefitted himself greatly and they got a significant payout from the credit ratings. One could debate mortgage lenders also was also helped from Moody's actions. For one yes, they were able to make a profit from the mortgages they were giving out. Requirements dropped, and the criteria has changed to better fit the amount of people they wanted to be homeowners. Even though this has given them a short-term profit, it did not account for long-term results. Ultimately in the long run, it has negatively impacted them. Investors being so heavily reliant on Moody's credit ratings was also affected from Moody's actions.

All known associates of the board have caused said financial crisis. As for Moody, his role in this financial crisis is due to the issuing of poor credit ratings. Home buyers were encouraged to lie to tell stretched truths to qualify for loans that they were clearly not eligible for but since there is no verify the information, the loans are proceeded as normal. Mortgage companies used these deceiving practices and pushed out as many loans as possible before rushing to sell to investments banks, this is so mortgage holders would have cash to for the monthly payments that are needed. This then led to the issue of firms paying for ratings and then relying on the ratings to determine whether to issue a bond or loan was pertinent. Moody has realized how government and policymakers are not concerned with people's credit rating, instead they rather have everyone be homeowners. He took advantage of the situation and played the system per se. Being so heavily dependent on the ratings, by the time firms discover how poor the ratings were the damage is already done. By then Moody has already begun downgrading the subprime bonds, more specifically Subprime XYZ. Subprime XYZ which was a RMBS comprised of 2,393 mortgages worth roughly $430 million to borrowers who are all considered to be subprime-people with poor credits and high-debt to income ratios. The CEO Raymond McDaniel has also obviously played a part in the financial crisis, however he decided to shift the blame to take the heat off himself personally during the Congressional investigations. McDaniel quotes "What happened in '04 and '05 with respect to the subordinate trances is that out competition, Fitch and S&P, went nuts. Everything was investment grade. It didn't really matter." By not following any ethical guidelines, it resulted in disastrous results. Moody's chose to remain in contention with competitors and his