Readings — From the May 2013 issue

This Is Not My Beautiful House

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From a February 4 complaint by the U.S. Department of Justice against the credit-rating agency Standard & Poor’s, charging that S&P fraudulently inflated ratings on residential-mortgage-backed securities (RMBS) and collateralized debt obligations (CDOs). The Justice Department is seeking $5 billion in penalties.

On or about March 19, 2007, Analyst D, who had conducted a “risk ranking” analysis of 2006-vintage RMBS, sent an email to several analysts with the subject line: “Burning Down the House — Talking Heads.” The email stated:

With apologies to David Byrne, here’s my version of “Burning Down the House.”

Watch out
Housing market went softer
Cooling down
Strong market is now much weaker
Subprime is boi-ling o-ver
Bringing down the house

Hold tight
CDO biz — has a bother
Hold tight
Leveraged CDOs they were after
Going — all the way down, with
Subprime mortgages

Minutes later, Analyst D sent a follow-up email stating, “For obvious professional reasons, please do not forward this song. If you are interested, I can sing it in your cube ;-).”

On or about March 21, Analyst D circulated another email, attaching a video of him “singing and dancing” the first verse of the song in S&P offices before an audience of laughing S&P co-workers.

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