Credit Ratings Shopping Clear? Wall Street Law Blog Thinks So
By Brett Sherman
Several complaints filed against Bear Stearns, its former subsidiaries, and/or JP Morgan by monoline Insurers like Assured Guaranty and Ambac describe a rather revealing reaction by Bear Stearns to October 2007 decisions by credit ratings agencies S&P and Moody's to cut ratings for certain Bear Stearns mortgaged-backed securities. *
On October 17, 2007, Tom Marano, Bear's mortgage chief, reacted to the downgrades in an email he fired off to key subordinates. In the email, an apparently outraged Marano explained exactly how he wanted Bear Stearns to respond to the S&P and Moody's downgrades:
"My intention is to contact my peer at each firm as well as the
investors who bought the deals. From there, we are going to
demand a waiver of fees. In the interim, do not pay a single fee to either rating agency. Hold every fee up."
We at Wall Street Law Blog submit that the only reasonable interpretation of the October 17 email is that -
A) Marano believed Bear had paid, or agreed to pay, good money to buy the credit ratings it needed, and that
B) S&P and Moody's had welched on that deal.
In other words, Bear Stearns (or at least Tom Marano) literally found the downgrades unacceptable.
Other interpretations, as always, are welcome.
*Counsel for Assured Guaranty, Ambac and others is the NY firm Patterson Belknap Webb & Tyler.