Dennis Prager: “What role did Wall Street play in producing the current recession?”
Sowell: “They played the role of suckers who bought mortgages that weren’t worth what they paid for them.
“A system had been set up whereby the government required financial institutions to have their securities rated by three government-designated rating companies. Wall Street didn’t have a lot of choice in this. The rating companies had no way of knowing how risky these things were because these new mortgages were very different from the things these rating agencies (Standard and Poor’s, Moodys, Fitch Ratings) normally rate.
“There are securities that have been around for 100 years. They have 100 years of data on what has happened to these securities in good times and war and everything else. They were good at rating these securities. These new securities were a decade old before they collapsed yet the law required these rating agencies to pretend to know how risky they were when no one knew.”
