Partnoy on the rating agencies

As commentator Thomas Friedman put it in 1996, "There are two superpowers in the world in my opinion. There's the United States and there's Moody's bond rating service. The United States can destroy you by dropping bombs, and Moody's can destroy you by downgrading your bonds. And believe me, it's not clear sometimes who's more powerful." (p. 86)

During the 1980s, no one understood and profited from credit ratings more than Michael Milken and his investment bank, Drexel Burnham Lambert. When Milken was in business school, he had noticed that bonds rated below the investment-grade level of BBB - were undervalued relative to higher-rated bonds. (p. 86)

The [rating] agencies played a central role in the collapse of Orange County. First, they had given AAA ratings to the structured notes Orange County bought. Second, [they] gave OC itself their highest ratings through December 1994, when the county filed for bankruptcy." (p. 118)

~ Frank Partnoy, Infectious Greed (2003)