ALBANY — In 2008, as risky mortgages dragged America deeper into a recession, then-New York Attorney General Andrew Cuomo announced he had reached landmark settlements to reform the nation’s biggest credit rating agencies.
The new guidelines required money upfront from investment banks before their subprime mortgage-backed securities were rated and the public posting of supporting ratings information. Cuomo promised it would fundamentally reform that market, “address one of the central causes of that collapse,” and start to restore investor confidence.
Yet by then, those investments, inflated securities that burst in the national financial crisis, were already drying up.
The mid-2008 agreements, obtained recently by The Associated Press after a Freedom of Information Law appeal, required Moody’s Investors Service, Standard & Poor’s and Fitch Inc. to publicly disclose due diligence and evaluation criteria and require partial upfront payments to prevent banks from simply buying the better ratings for those securities.
The agencies say they haven’t rated new ones since. Meanwhile, the 42-month agreements expire in about a year. They admitted no wrongdoing, say they are in compliance, and have taken steps to make the rating process more transparent.
In short, by the time Cuomo declared he had fixed the problem, and boosted his political arc toward becoming governor, the investment banks had already stopped pitching the risky securities.