These cheers are about an issue on which Barney Frank and the editors of The Wall Street Journal agree. And I agree, too. On most matters of high finance I'm more on Barney's side than that of Paul Gigot or my old friend Daniel Henninger. But this question is less a matter of politics than of honor and honesty.
Some of you may recall my own idée fixe on what an editorial in Wednesday's Journal called the "credit-ratings racket" practiced by three portentous companies: Standard & Poor's, Moody's and Fitch. My obsession extended to a slightly different expression of the game--called M.B.I.A.--by insuring debt of public authorities the credit worthiness of which it had itself judged not exactly scupulously. (I am ethically obliged to tell you I, as I did when I was writing about the fakers, that I made some nice money on the down side.)
I recall walking into Congressman Frank's Newton office with my old friend and partner Bill Ackman who was beginning to tell him about credit-ratings fraud. "I know a lot about that," said Barney. "Tell me more..." Which Bill did.
The House has just passed legislation to end the privileged position of the fatal three, ensconced by law to assess securities for which assessments there are no standards. You got a triple-A ratings from S&P, and it was like a certfification from the feds.
As were the consequences for the entire economy including the poor people who'd been seduced into buying houses they couldn't afford.
And, by the way, a book about the M.B.I.A. self-made catastrophe, is about to be published. It is by Christine S. Richard and is called Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff. I figure in the book a bit, too
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