California Attorney General Brown To Launch Investigation Into Rating Agencies' Role In Fueling The Financial Crisis

California AG Jerry Brown joins the ranks of Attorneys General to scrutinize the disastrous role the credit rating agencies played in the financial crisis. On Thursday, Brown will announce the investigation's launch.

From the press release:

San Francisco - At a news conference Thursday, September 17, 2009 at 10:30 a.m., Attorney General Edmund G. Brown Jr. will announce that he is launching an investigation into the role credit rating agencies played in fueling the financial crisis.

At the peak of the housing boom, these agencies gave their highest credit ratings to complicated financial instruments, including securities backed by subprime mortgages, making them appear as safe as government-issued Treasury bonds.

In rating these securities, these agencies worked behind the scenes with the same Wall Street firms that created them. For their work, the agencies earned billions of dollars in revenue, at a rate double what they earned for rating other financial products.

A good starting place could be this instant message exchange between two employees at S&P, one of the biggest rating agencies, captured in our Most Damning Internal Emails Of The Financial Crisis slideshow:

"Official #1: Btw (by the way) that deal is ridiculous.

Official #2: I know right...model def (definitely) does not capture half the risk.

Official #1: We should not be rating it.

Official #2: We rate every deal. It could be structured by cows and we would rate it."