Meanwhile, ProPublica has a good post on how conflict-of-interest at debt-rating agencies stoked the current crisis. Here are two S&P employees chatting on IM last year:
S&P Employee #1: btw-that deal is ridiculous
S&P Employee #2: I know right.. model def does not capture half of the risk
S&P Employee #1: we should not be rating it
S&P Employee #2: we rate every deal
S&P Employee #2: it could be structured by cows and we would rate it
S&P Employee #1: but there’s a lot of risk associated with it – I personally don’t feel comfy signing off as a committee member.