When You Take Cops Off The Beat

[via Atrios] Bloomberg reports [1] that the U.S. Securities and Exchange Commission found that credit-rating companies “violated internal procedures” and played fast and loose with conflict of interest guidelines, setting the scene for what came next.

The SEC report describes an e-mail in which an analyst refers to the market for collateralized debt obligations as a ``monster.''

``Let's hope we are all wealthy and retired by the time this house of cards falters,'' said the e-mail, which was sent Dec. 15, 2006, to another analyst at the same firm.

It seems, ratings firms were busy protecting their bottom lines by covering their clients' bottoms. That's why Federal Reserve Chairman Ben Bernanke today called for expanding the Fed's authority to oversee new kinds of financial services companies. "We need more governance," suggested a spokesman for the American Enterprise Institute. But let's not go crazy, he cautioned, lest we stifle [2] the banking sector. Which sounds a lot like how we ended up here in the first place.

The SEC report noted "remedial actions" credit rating firms had agreed to, according to Bloomberg. Translation?

The SEC recommendations are ``polite bureaucratic prose for saying we're not cracking down on them,'' said John Coffee, a securities law professor at Columbia University in New York.

A friend who was with FDIC back in the 1980s says he and his colleagues saw the savings and loan collapse coming well in advance. They knew that the subprime mess was headed their way, too. Just like the last time conservatives ran the henhouse. They don’t like oversight. They don’t do oversight. Even when they ask for it and are being paid to do it.

Wonder why?

“Look around man. All the cops are at something. It's Christmas, you could steal City Hall.” – from Die Hard With A Vengeance