Senior Federal Reserve officials including Chairman Ben S. Bernanke warned in August 2007 that investor confidence in credit rating companies was fading, risking greater instability in financial markets.
“There is an information fog” that “is very much associated with the loss of confidence in the credit-rating agencies,” Bernanke said at a meeting on Aug. 7, 2007. The firms’ “credibility has been shot” and “it is much harder to see that this market will unwind itself in a rather kind and comforting environment,” said Kevin Warsh, then a Fed governor.
The 2007 transcripts of the Federal Open Market Committee, released last month, open a window onto how Fed officials viewed ratings companies during the end of the period that is the focus of a U.S. Justice Department lawsuit against McGraw-Hill Cos. and its Standard & Poor’s unit.
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