Media Maneuvers: Bad credit
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An original thought it's not. Not only have the ratings agencies taken it on the chin after almost every financial debacle of the past 20 years — from junk bonds to the Asian debt crisis to Enron — but they have already received a public drubbing for the subprime meltdown. Indeed, the piece's author, Joshua Rosner of Graham Fisher & Co., which bills itself as an independent research consultancy, made his case against the ratings agencies in an op-ed piece in The New York Times on July 25. Amazingly, less than two months later, Rosner was able to persuade The New Republic not only to run what's essentially the same article — even if the words have been changed and rearranged — but to celebrate it as the best thing to hit the market since, well, adjustable-rate mortgages:
"American commentators have been surprisingly slow to grasp that it is the rating agencies … who are mostly responsible for the mortgage crisis," New Republic editor-in-chief Marty Peretz wrote on his blog, The Spine. "The story has already hit Europe, big time. But Joshua Rosner has done the best short and comprehensive article in an American periodical right here in TNR."
With all due respect to Peretz, and understanding the need to self-promote, say whaaaat? By this point, enough commentators on this side of the Atlantic have "grasped" the ratings agencies' role in the subprime meltdown that blaming them for the market mess qualifies as parroting the conventional wisdom. The Wall Street Journal fingered the agencies for their role in pumping up the now-deflated subprime boom in a front-page story (headlined "How Rating Firms' Calls Fueled Subprime Mess") on Aug. 15. Even the luxury-addled minds over at Condé Nast's Portfolio cottoned onto this one. Its second issue, which hit newsstands in August, featured a lengthy piece that described the mortgage mess as the ratings agencies' Waterloo — and named Rosner as a critic of the industry, to boot.
Maybe nobody inside the Beltway reads or cares about Portfolio or the WSJ. Still, singling out just one group for blame in the subprime bust is overly simplistic. What about the lenders who made the loans, the borrowers who accepted them or the Wall Street firms who packaged them into securities? And that's just for starters. For a more comprehensive view of who's at fault, a reader would do better to consult the Sept. 17 issue of Fortune and its overview, "Oh, the people you'll blame," which also includes a section on — you guessed it — the ratings agencies.
In any case, the mortgage crisis certainly has been a boon for Rosner, who has been making the media rounds with his message about the ratings agencies and getting much play for his efforts. Over the past few weeks, he's been quoted or mentioned everywhere from The Washington Post to the International Herald Tribune to the U.K.'s Sunday Independent to The Economist opining on the credit agencies and subprime debt.
Rosner's rise to mortgage-mess-commentator fame actually began in February, when he published, with Joseph R. Mason, a professor at Drexel University's LeBow College of Business, a paper entitled "How Resilient Are Mortgage-Backed Securities to Collateralized Debt Obligation Market Disruptions?" Their research, which the Hudson Institute, a Washington think tank, funded, was summarized by no less than The New York Times' Gretchen Morgenson in one of her many the-sky-is-falling columns, mortgage division. Mason and Rosner's paper, according to Morgenson's summary, "found that insufficient transparency in the CDO market, significant changes in asset composition, and a credit rating industry ill-equipped to assess market risk and operational weaknesses could result in a broad financial decline." The researchers contended that things could start to fall apart as soon as the housing industry weakened.
Now Rosner is reaping the rewards of his prescience. In a crisis that has produced few heroes of the crusading variety — there's no Eliot Spitzer here leaking e-mails to the press or congressional committees holding hearings — Rosner's star seems to be rising, at least in medialand, as the go-to guy for insight. He's already earned kudos from Peretz and been quoted by Morgenson. Not bad. A turn on the nightly news or on Capitol Hill can't be far behind.—Yvette Kantrow
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