'If someone had elevated to my level that we were putting, on a $2 trillion balance sheet, $40bn of AAA rated, zero risk paper, that would not in any way have excited my attention', Prince told the Financial Crisis Inquiry Commission, according to a transcript of his testimony released in 2011.
Mortgage securities granted top grades started souring in 2007, leading to ballooning losses. Citigroup required a $45bn federal rescue, the largest of the bank bailouts that put taxpayer money at risk. The Justice Department sued New York-based S&P and parent McGraw-Hill Cos. last week over the damage caused by the practices allegedly behind the inflated rankings that contributed to the biggest financial crisis since the Great Depression.
Some of the biggest losers were banks, including Citigroup and Bank of America, which created and purchased collateralized debt obligations. Many of these investments - created by packaging mortgage-backed bonds, derivatives and other CDOs and dividing them into new securities with varying degrees of risk - imploded within a year after they were sold, even though they had pristine credit ratings.
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