How Rating Firms' Calls Fueled Subprime Mess

By 2006, S&P was making its own study of such loans' performance. It singled out 639,981 loans made in 2002 to see if its benign assumptions had held up. They hadn't. Loans with piggybacks were 43% more likely to default than other loans, S&P found. In April 2006, S&P said it would raise by July the amount of collateral underwriters must include in many new mortgage portfolios. For instance, S&P could require that mortgage pools have extra loans in them, since it now expected a larger number to go bad. Still, S&P didn't lower its ratings on existing securities, saying it had to further monitor the performance of loans backing them. It thus helped the market for these loans hold up through the end of 2006.

How Rajat Gupta Came Undone

The downfall of a Goldman Sachs director:

"Now from, for the last three or four, I mean four or five years, I've given him a million bucks a year, right?" says Rajaratnam. "Yeah, yeah," says Gupta, who doesn't appear taken aback at all by Rajaratnam's next remark: "After taxes. Offshore. Cash."

The People vs. Goldman Sachs

While much of the Levin report describes past history, the Goldman section describes an ongoing? crime — a powerful, well-connected firm, with the ear of the president and the Treasury, that appears to have conquered the entire regulatory structure and stands now on the precipice of officially getting away with one of the biggest financial crimes in history.

2011 Pulitzer Prize: National Reporting: The Wall Street Money Machine

A series on how some Wall Street bankers, seeking to enrich themselves at the expense of their clients and sometimes even their own firms, at first delayed but then worsened the financial crisis.

  1. The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going

  2. The ‘Subsidy’: How a Handful of Merrill Lynch Bankers Helped Blow Up Their Own Firm

  3. Banks’ Self-Dealing Super-Charged Financial Crisis