Remember Arthur Anderson. They're gone, but the US Supreme Court concluded that they weren't guilty! They make O J Simpson look like the picture of innocence, and yet somehow the Supreme Court felt the need to grant certiorari and then decide actually people who do crimes aren't necessarily guilty of those crimes if they're rich old white men...

I don't think that's enough, David Duncan in particular should have gone to jail, but it's not as if there were no consequences and to be fair to the US government they went after AA hard.

> They were indicted for shredding documents. These documents were drafts and other items that do not support the final product. All accounting firms establish policies for routinely shredding such documents.

See - all routine. Sure, your routine might not include being "reminded" to arrange for piles of documents to be urgently shredded once you hear investigators are coming but that's why you might some day be found guilty of crimes, whereas Arthur Anderson were "not guilty" after all the evidence was destroyed and their chums in the US Supreme Court reached in and overturned verdicts against them for destroying the evidence.

Now, one of the nice things in overseeing the Web PKI is that I don't care whether the auditors are incompetent or crooked, it's the same either way to me. I don't expect even their own bosses to do as much as slap them on the wrist for enabling fraud. If I'm relying on audit then I know I might as well toss a coin, I'm always going to be digging deeper than that to understand what was actually going on regardless of whether the auditors "forgot" or deliberately chose not to look.

Previously, if they rated junk debt as AAA, and you bought that debt based on that rating, you would have no recourse for their misrepresentation of risk as they were granted immunity from such things. To make matters worse, for some regulatory purposes companies were required to buy instruments rated by these organizations and take these ratings at face value.

With the change in law, if someone sells me junk debt rated as AAA by one of these NRSROs, I can now sue the NRSRO in court for damages for misrepresenting risk. For any particular rating, there are thousands of companies, often with deep pockets, who have standing to recover losses from the rating companies for misrepresentation of risk. Even if they avoid criminal liability, there is the very real prospect that the civil liability would destroy them.

The models the rating agencies were using were not secret. They defined to a great extent what was allowed to go into a pool, and how much support and credit enhancement would be necessary for the senior tranche to get a AAA rating. So as a pension fund manager, if I see to pieces of AAA paper of similar maturity trading at radically different yields, I have to consider am I getting a deal, or does the smart money know something about one of these deals? And honestly if I just buy in bulk, relying on the rating alone without due diligence on the deals, shouldn't I bear some responsibility?

Beyond that, it's not clear that you could prove civil liability. The ratings were based on models, and the models were based on historical experience (and some wishful thinking.) But when push comes to shove in the context of billion dollar lawsuits, you can imagine they'll tease the wishful thinking out of the models and show that their rating models, though flawed, were based on a reasonable interpretation of historical experience and that ratings are not an endorsement or a guarantee of suitability.

As someone who witnessed the crisis up close, the ultimate cause of the crisis was a bunch of ordinary people, both on Main street and on Wall Street, making good faith decisions that seemed rational at the time, but in retrospect proved to be idiotic.

https://www.cnbc.com/2018/05/24/trump-signs-bank-bill-rollin...