Financial Alchemy Quotes
He observes that many of the richest people and businesses are those who have lobbied for laws that either enrich them or hinder their competitors. Reduced regulations turn into "gold" on several ways: The company no longer has the administrative cost of complying with the regulations—thus increasing their profits. At the same time often the regulation prevents taking advantage of consumers or other businesses and when repealed, the company can go back to the pre-regulation era and obtain more business or higher prices, both of which increase profits—gold.
Moody’s and Standard & Poors, the 2 largest credit rating agencies, gave A ratings to securities that had packaged terrible F-rated, toxic, subprime mortgages, and gotten the credit ratings agencies to rate them as A on the theory that the risk was diversified. Each new security like this that a bank put out was submitted informally to one of the credit rating agencies to “discuss”. If the agency “concluded” that they could give it an A rating, they received a very large fee. If not, the bank would not officially submit the security and not pay anything. That almost never happened with these packages of subprime mortgages.
