The congressional investigation of the credit agencies that looked over the pool of steroidish securities that were pumped into the financial industry and gave them all triple A ratings starts today. The biggest of those agencies is Moody’s:
“Over the last decade, Moody’s and its two principal competitors, Standard & Poor’s and Fitch, played this game to perfection — putting what amounted to gold seals on mortgage securities that investors swept up with increasing élan. For the rating agencies, this business was extremely lucrative. Their profits surged, Moody’s in particular: it went public, saw its stock increase sixfold and its earnings grow by 900 percent.
By providing the mortgage industry with an entree to Wall Street, the agencies also transformed what had been among the sleepiest corners of finance. No longer did mortgage banks have to wait 10 or 20 or 30 years to get their money back from homeowners. Now they sold their loans into securitized pools and — their capital thus replenished — wrote new loans at a much quicker pace.
Mortgage volume surged; in 2006, it topped $2.5 trillion. Also, many more mortgages were issued to risky subprime borrowers. Almost all of those subprime loans ended up in securitized pools; indeed, the reason banks were willing to issue so many risky loans is that they could fob them off on Wall Street.”
Now, outside of Texas, Moody is just a name – but inside of Texas, it is the name of one of the great crazy Texas families. There is something delightfully ludicrous in the fact that Moody’s makes its money by selling its sound judgment, given that the Moody family is better known for inhouse squabbling, jailed siblings, and sex scandals. The Moody family is inseparable from their scene: Galveston. There are people who have been to New Orleans. And they’ve been to France. And so they think they know the world. Ho ho ho, if you haven’t been to Galveston, you are still a little wet behind the ears in this world.
Famously, Galveston stopped on September 8, 1900, when the great hurricane hit, which plucked out 8,000 people – out of 32,000 – and killed em dead. Galveston was the richest city in Texas at the time, as you can see by simply going there and strolling among the mansions. Many of those old mansions remain – they were built to survive about anything except the neglect in which they have now dwindled for a century. But even so – even as Houston took over, as it was going to do anyway, as the most important port in Texas – Galveston still had wealthy families. It was fabulously located, for instance, to become one of the great smuggling cities in the Prohibition era. Like New Orleans, Galveston thrived on vice – gambling and prostitution. And it had the Moody family.
The Moody family started out in the cotton trade, then went into insuring cotton merchants, and then went into insurance. They diversified into other industries – hotels, for instance. In the twenties, they about controlled the island – built the one skyscraper in Galveston, bought the paper, rolled in money from the increase in business brought about by oil. And the family proper began to act like the second coming of the Borgias. One of the really great, spoiled Moody’s back then was Shearn Moody – his wife a showgirl, himself a playboy and a good hater. Running the newspaper gave him plenty of space to vent, which he like to do about various and sundry enemies. Here’s a quote from Cartwright’s book on Galveston about Shearn Moody:
“At the peak of the Depression, the Moodys were making money hand over fist, much of it from repossessions. Shearn Moody filled his home on Cedar Lawn Circle with linens, silver and china that had once belonged to creditors [sic]. Conrad Hilton, who managed the Moody hotel chain in the early 1930s, once described Shearn Moody as the kind of man who liked the Depression” “People are desperate for money,” Shearn had told Hilton. “It’s the time to drive a good bargain.”
Shearn Moody was almost to a tee the kind of millionaire portrayed in There will be blood. Here’s another anecdote. Hilton had lost his hotel to the Moodys when they foreclosed on him, but they offered him a deal – merger with the Moody hotel chain, which he would manage:
“But Hilton instinctively mistrusted the younger Moody. He couldn’t forget the remark Shearn had made about the Depression – or the passion with which Shearn regarded his enemies. Shearn absolutely doted on his enemies: he was addicted to them. When Hilton asked Shearn why it was that nine out of ten men who did business with him ended up as enemies, Shearn replied coldly: “Because that’s the way I like it. I’d like it even better if it was ninety-nine out of a hundred.”
Shearn Moody died before his father, so it was due to the old man that the family money ended up in a tax dodge. However, it wasn’t just the tax dodge that was attractive about the Moody Foundation – it was also the fact that the Old Man’s daughter and his grandchildren would be left forever dependent on this organization he had built. Which is how we segue into the colorful life of Shearn Moody, Jr. Shearn Jr spent his young adulthood establishing a reputation as a great 60s partier. Famously, his bedroom had a door which opened on a slide that you could use to go down to the pool. Here’s an anecdote about Shearn Jr.:
“During the 1960s, the ranch was infamous for its wild parties. Billy Furr, a frind of Bobby Moody, remembered that when he walked throught he front door on one occasion he was greeted by a naked woman who asked him to sign the guestbook. “Then I looked around the room,” Furr said, “and realized there were several dozen naked men and women standing around. Somebody told me they were the cast of the San Francisco Ballet. I never found out if that was true or not, but I’d never seen anything like it in the State of Texas.”
Shearn Jr. had many adventures, some that involved Watergate – he claimed he was targeted by Nixon for dirty tricks as he was a Democratic party funder – and some involving a possible assassination threat to George Wallace, and some involving penguins that were imported for the swimming pool, and some involving money that landed Shearn Jr. in jail for a bit.
This is the Moody family, whose company rates your mortgage pools, America. Don’t that beat all, now. Us Texans are gonna be the death of this country yet!