Fraudulent AAA Credit Ratings Have Many Tentacles, Don't They?

Food for thought...

Isn't there a direct relationship between bogus AAA credit ratings and fraudulent SEC filings?

 

Let’s say, circa January 2006, a hypothetical investment bank’s mortgage securitization group solicited and obtained AAA credit ratings (via ratings shopping) for RMBS (or related structured products) even though the bankers KNEW that, in reality, the mortgage bonds were far riskier than AAA rated investments are supposed to be. 

Now, let’s say that the same bank is holding some (or even a lot) of these dubious AAA rated mortgage-backed securities at the end of the 2006. 

 

 

AAA Credit Ratings Like Octopi?

 

 

Wouldn’t Bear Stearns - er Lehman - er Merrill ...  I mean, wouldn’t the hypothetical bank - knowing that the AAA ratings were bogus - account for the bonds in the annual report as if the bonds were virtually, if not entirely, riskless?  And, if so, how could the annual report be anything other than materially misleading (i.e., securities fraud and accounting fraud)? 

Just asking...

By Brett Sherman

The Sherman Law Firm, Publishers: Wall Street Law Blog