CREDIT RATING AGENCIES AND THE FINANCIAL CRISIS ...

186phasizing the fact that our ratings are opinions and they’re formulatedby people that have done the best they can with good faithto look at all the analysis they can. The ratings can change overtime, and they do; and it’s better that we disclose the fact that theyare opinions as clear as we can.Ms. NORTON. Well, anything anybody says is an opinion unlessit’s a scientific fact. We do understand that.But, Mr. Joynt, let me give you a hypothetical. If you rate agroup of bonds as AAA and those bonds fail, would you say thatrating was accurate or inaccurate?Mr. JOYNT. I would say that it did not project the kind of riskthat investors—that our ratings were intended to project.Ms. NORTON. I’m asking you about your rating. Would you sayit was accurate or inaccurate?Mr. JOYNT. I would say it did not reflect the risk that AAA wasdesigned to reflect, a high degree of likelihood of repayment of principaland interest——Ms. NORTON. Was it inaccurate or accurate?Mr. JOYNT. I suppose inaccurate.Ms. NORTON. I just ask that because most investors will approachthis with a high degree of reliance. And the three of youseem to be having it not both ways, but all ways. On the one hand,the legal disclaimers saying people shouldn’t rely on what you saybecause it’s your opinion, they can’t possibly be accurate or inaccurate.On the other hand, you are telling investors and they arepaying because they believe you—that’s why I quoted how profitableyou are—that you have the best methodology and the best ratingrecord and the most expertise, so they should pay you billionsof dollars. And they comply.So let me ask each of you a question. Do you think your companiesin any way are responsible for what has happened to our economy?Mr. JOYNT. Well, I attempted to answer that question earlierfrom the standpoint of the ratings volatility; and the downgrades,since we weren’t able to project forward this crisis in housing coming,would have impacted prices of securities and that would havecontributed to the volatility in the market, which has contributedto the crisis.So I certainly——Ms. NORTON. So do you all accept some responsibility for whathas happened to the economy given the reliance of investors, ordinarypeople and others, on your ratings? Do you accept some responsibility?Chairman WAXMAN. The gentlewoman’s time has expired, but Iwant to give each of you an opportunity to further answer thequestion.Mr. MCDANIEL. With respect to this crisis, I think there are responsibleparties throughout the marketplace——Ms. NORTON. Including yourselves?Mr. MCDANIEL. That includes the credit rating agencies andMoody’s. Our opinions were best opinions based on information wehad at the time, but they had to change rapidly and on much moreof a wholesale basis than what we would like to see, obviously.Ms. NORTON. Mr. Sharma.VerDate 11-MAY-2000 12:35 Aug 24, 2009 Jkt 000000 PO 00000 Frm 00190 Fmt 6633 Sfmt 6633 U:\DOCS\51103.TXT KATIE PsN: KATIE