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Rating Agencies Repeatedly Caved To Banks’ Demands And Helped Cause Crisis, Report Finds

NEW YORK — The major credit rating agencies repeatedly sold out to Wall Street banks, so addicted to short-term profits that they repeatedly sacrificed the accuracy of their reports to maintain a competitive edge, a two-year government inve…

NEW YORK — The major credit rating agencies repeatedly sold out to Wall Street banks, so addicted to short-term profits that they repeatedly sacrificed the accuracy of their reports to maintain a competitive edge, a two-year government investigation has concluded.

Rather than assess risk accurately, two major rating agencies sold their top seals of approval to their investment bank clients, blessing products that the agencies themselves knew to be undeserving, the Senate Permanent Subcommittee on Investigations concluded in a report released Wednesday. By repeatedly debasing their standards, these agencies helped banks sell shoddy securities to unsuspecting investors, inflating the value of assets that turned out to be worth far less, the report has found.

The senate panel, led by Carl Levin (D-Mich.) and Tom Coburn (R-Okla.), levels a two-part charge against the rating agencies: Not only did these companies help inflate a dangerous bubble, the report says, but they also bear responsibility for popping it, as their abrupt downgrades of mortgage-linked securities in 2007 helped set off the panic that caused markets around the world to collapse.

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