Legally Moody did not commit a felony, however, many questioned Moody’s integrity for a few different reasons. One being the accuracy of their credit ratings. Moody’s gave home loans to people with low incomes and poor credit histories, and as a result many of these buyers were unable to make their monthly payments. So people said that Moody’s underestimated the danger built into these securities. Millions of investors trusted credit rating agencies like Moody’s for an objective and independent rating, and Moody’s completely broke that trust and downgraded its ratings on numerous mortgage-backed bonds. The stakeholders that benefited from Moody’s actions were the low-income homeowners who traditionally did not qualify to get a mortgage because …show more content…
Another conflict of interest was that if they liked a company more than another they would rate the company they liked more, higher. Some steps would be to alter the relationship between the bond issuers and the rating agencies. Lenders should not be able to pick and choose between agencies based on who will give them a higher rating. Another step to eliminate this conflict would be to create a committee that has multiple people vote on the ratings, in order to eliminate bias. Moody didn’t bear nearly as much responsibility compared with that of homebuyers, mortgage lenders, investment bankers, government regulators, policymakers, and investors. The companies gave out homeowner loans while Moody just rated the companies bringing customers in. Moody never forced a signature among any of the customers; they just recommended them based on the ratings. The homeowners were essentially taught to be dishonest about their qualifications of acquiring a mortgage because no one would check their information. Government regulators and policymakers allowed lenders to give subprime loans to people who were not qualified by endorsing low interest rates to low income, possible …show more content…
The initial step that can be taken to prevent a recurrence of something like the subprime mortgage meltdown is that the lenders should be more strict on their standards and who they give the loans out too to make sure the people they give loans to have creditworthiness. The second step that can be taken would be to have more government regulation. For example there should be greater consequences if the guidelines for giving loans are not entirely met, and the banks should be held responsible for subprime lending. Another step that should be taken is for the credit rating agencies to have more internal supervision inside the agencies to make sure the ratings are accurate and authorize external sources to regularly check the standard in which they do their ratings of the securities by. The last step that should be taken is that public policy should not push lenders to be so flexible on standards, and the public policy should make the lenders more accountable for their actions and choices they make. Public policy needs to be a huge part in the process, making sure there nothing shady is happening along the