[credit provider=”Kate Mereand on Flickr” url=”http://www.flickr.com/photos/katmere/4806180629/”]
It’s almost scary how blasé Brian Clarkson, the former president of Moody’s, is on the part that ratings agencies played in the market crash of 2008.Thanks to Ben Protess at Dealbook for audio-mining the FCIC testimony of Clarkson, which, even from the small sampling of the information, is enough to paint a picture of, at the very least, Clarkson’s attitude to Moody’s role in the crisis.
Clarkson is “hazy” on pretty much everything, and his answer to every question appear to have fallen into two categories: “No”; and “I don’t recall.”
Clarkson spent 17 years at the ratings agency — he headed up its structured-finance unit during the mortgage boom — and was annointed President in 2007, before retiring in 2008. He obviously has a deeply institutional knowledge of the firm, yet, his testimony gives the impression of a man who was completely disconnected from the company over which he was supposed to reign.
In sum, his explanation for how ratings agencies is three words: “I don’t know.”
We can’t tell if that’s saying nothing, or everything.
According to Dealbook,
In private testimony… Mr. Clarkson didn’t remember crucial details about his tenure, including staffing decisions and overall strategy. Mr. Clarkson’s vague responses are sprinkled throughout his six-hour-long interview…
Clarkson’s written testimony for the hearing — which he never delivered — was largely unapologetic. He said the risk posed by subprime securities “was well understood by Moody’s,” which had a “culture of candor, transparency and responsiveness to market dynamics.”
When Clarkson was asked what his plans had been for Moody’s after he was elevated to president in 2007, he said: “No, I don’t remember any goals.”
When Clarkson was asked whether Moody’s gave discounts to certain banks that sought out ratings, he said: “I don’t know.”
When Clarkson was asked personnel changes that took place as the firm courted Wall Street, he said: “I don’t recall specific analysts.”
When Clarkson was asked whether he had any discussions about firing employees who voiced fears about the dangerous nature of the Wall Street-Moody’s relationship, he said: “I don’t recall.”
Another highlight, in fact, was the discussion of the incestuous relationship between Moody’s and the bank’s who it was supposed to be objectively grading. Clarkson testified that Wall Street outreach and cultivation was central to his job:
From the day that I started at Moody’s, Moody’s was deeply concerned about the relevance they had in the marketplace. A rating agency may have a methodology that is superior. But if they’re not assigning any ratings, they don’t have any relevance in the marketplace.”
But perhaps most disturbing off all, was when Clarkson was asked about his biggest regret as a Moody’s employee. And his answer had nothing to do with bank failure, or the millions of American’s that lost millions of dollars because they invested in shoddy products pedalled by banks that Moody’s gave a AAA rating. It was about the damage to the Moody’s name:
Regret is a tough word. I regret that the assumptions we made along the way in certain areas were not predictive. I think that, externally, they hurt Moody’s reputation.
That is just depressing.