As the housing market deteriorated in early 2007, the gallows humour in the emails intensified. Banks that had created mortgage-backed securities were unloading them quickly, to avoid being stuck with any duds.

“That means the market will crash,” one analyst told another in an instant message.

“Deals will rush in before they take further loss.”

“Yes,” said the analyst’s colleague. “We should not push criteria,” continued the first, “but we give in anyway. Ahahhahaha.”

About a month later, another S&P employee wrote in another instant message, reproduced in the complaint: “We rate every deal. It could be structured by cows and we would rate it.”

In its statement Tuesday, S&P said that the cow email “had nothing to do with RMBS or CDO ratings or any S&P model, and the analyst had her concerns addressed with the issuer before S&P issued any rating.”

S&P said that there was a robust internal debate about how a rapidly deteriorating housing market might affect the CDOs, “and we applied the collective judgment of our committee-based system in good faith.”— New York Times News Service

More In: Business