Can Wall Street Be Trusted ?

Many Americans use brokers and market analysts to provide them with the information necessary to successfully invest their money. Are these people really trustworthy? That answer seems to be that they can be trusted -- to do what is in their own interest, regardless of whether it is your interest or not.

This sad fact is brought to light by the actions of Moody's Investors Service. In 2007, right before the market crashed and the nation was plunged into recession, the analysts at Moody's were still giving high ratings to pools of mortgages that were soon downgraded to "junk" (and are now referred to as "toxic assets"). Why were they doing this?

There are a couple of reasons. First, was the granting of stock options to middle management. The people who acquired this stock had a built-in incentive to see the stock continued to grow, and the best way to do that (they thought) was to see that the market continued to grow. And people aren't going to buy stocks or securities that have a low rating.

The top company leadership, who also had plenty of this stock themselves, had the same motivation to enhance their own profits. That's why they fired the honest analysts they had who were questioning the high ratings of these junk securities, and promoted the ones who supported the high ratings.

According to McClatchey News, "The securities and Exchange Commission issued a blistering report on how profits had undermined the integrity of ratings at Moody's and its main competitors, Fitch Ratings and Standard & Poor's, in July 2008."

This should come as no surprise to anyone. These people are in the same financial industry that was giving out bonuses as their own industry and the economy of our nation were both going in the dumper. These high ratings of "toxic assets" caused a lot of investors to lose a lot of money (and hurt a lot of ordinary people's 401K's).

These people made the decision that their own profits were more important than being honest. That doesn't speak well for the industry.