Rating agencies get more blame
Who was at fault for the financial crisis? Top of the list are the credit rating agencies, said a panel of Wall Street bosses in New York.
Financial investor JC Flowers’ boss Christopher Flowers was among those slamming them for rating so many companies the highest grade of “AAA”, saying “mis-ratings” led to “extraodinary damage” to the financial system.
Also speaking on the panel, titled the “The Big Fix”, Fomer AIG Chief Executive Hank Greenberg agreed. “What they did was outrageous,” Greenberg said. “They caused great damage to financial Institutions.”
Rating agencies have been criticized for not giving early warning of a number of big corporate debt scandals, and also for their ratings of complex products that were hit hard by widespread defaults on U.S. subprime mortgages and the ensuing credit market crisis.
Blackstone Group Senior Chairman and Co-Founder Peter Peterson, the third panel member, in addition singled them out as one of the causes of the problem, while also pointing the finger at corporate managers, who took “extraordinary risks” by leveraging companies too highly.
Vanity Fair columist Michael Wolff led the discussion, which drew a diverse crowd that included Wall Street players and key New York powers.
Asked what his biggest fear was, Peterson cited worries that foreign capital loses confidence in America. “We’re living on the naive assumption that foreign lenders will lend unprecedented amounts forever,” he said.
Flowers and Peterson said they were looking to the real estate market for an indication that the crisis is over. ”This won’t be over until real estate bottoms out,” said Flowers.