‘The rating agencies were important tools,’ Jim Callahan, a trader for the investment bank Salomon Brothers, said, ‘because the people that we were selling these bonds to had never really had any history in the mortgage business. They were looking for an independent party to develop an opinion.’ But there was a critical failure of incentives at the credit rating agencies. In truth, they weren’t really independent actors. They were companies. And they were being paid by the very same banks whose products they were evaluating.
