The Obama administration attacked the credibility of the analysis underlying Standard & Poor’s decision to downgrade the United States’ top credit rating on Friday, saying it had found a $2 trillion error. (Reuters)

The interpretOr has accessed an April 2011 US Senate report that specifies a host of factors responsible for the inaccurate credit ratings issued by Moody’s and S&P:

‘One significant cause was the inherent conflict of interest arising from the system used to pay for credit ratings. Credit rating agencies were paid by the Wall Street firms that sought their ratings and profited from the financial products being rated. Under this “issuer pays” model, the rating agencies were dependent upon those Wall Street firms to bring them business, and were vulnerable to threats that the firms would take their business elsewhere if they did not get the ratings they wanted.’

The rating agencies weakened their standards as each competed to provide the most favorable rating to win business and greater market share. The result was a race to the bottom.

source:

United States Senate PERMANENT SUBCOMMITTEE ON INVESTIGATIONS Committee on Homeland Security and Governmental Affairs

Carl Levin, Chairman Tom Coburn, Ranking Minority Member

WALL STREET AND THE FINANCIAL CRISIS:

Anatomy of a Financial Collapse

MAJORITY AND MINORITY STAFF REPORT

PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

UNITED STATES SENATE

April 13, 2011

http://hsgac.senate.gov/public/_files/Financial_Crisis/FinancialCrisisReport.pdf