The floor of the New York Stock Exchange
The floor of the New York Stock Exchange - 
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Steve Chiotakis: Greece's credit ratings are awful, that's why the country can't borrow at reasonable rates as you heard. Now this morning, a Senate subcommittee says ratings agencies are partly responsible for the financial crisis. Moody's, Standard & Poors and Fitch were supposed to be referees in the mortgage-backed security game, but those refs have been accused of taking bribes, and accusations are flying that there was too close of a relationship between agencies and the banks. Marketplace's Gregory Warner's been keeping an eye on that story. He's with us live from Philadelphia to talk about it. Good morning, Gregory.

Gregory Warner: Good morning.

Chiotakis: How close was the relationship between credit rating agencies and the banks?

Warner: It was pretty close. I mean a lot of what we know now about that relationship is from these internal e-mails sent by credit-rating agency employees. And in one e-mail -- this is back in 2006 -- an S&P employee compared his co-workers to hostages who have internalized the ideology of their kidnappers. He wrote that they had become so dependent on banks for fees that they developed Stockholm Syndrome.

Chiotakis: How widespread was this, Gregory? Did every credit-rating agency have the same problem?

Warner: Well credit-rating agencies were competing against each other for business, so it was in their interest to keep banks happy. I reached Bill Brown of Duke Law School at home this morning:

Bill Brown: As soon as they gave a very high rating to a deal, bankers and other people would come to them with another deal. As a result of this sort of feedback loop, the rating agencies were at the very core of pyramiding our debt out of control.

The rest of the story of course is that by 2007, the agencies started correcting their estimates and downgrading lots of ratings. According to the panel, that triggered a massive sell-off and helped cause the collapse of the subprime market.

Chiotakis: So they've upgraded during the boom, now they've downgraded in the bust. Have we solved anything?

Warner: Well, I mean the financial reform bill that's coming up for debate in the Senate next week does take some steps to make them more accountable. It allows investors, for instance, to sue agencies for shoddy ratings. But others say the reform bill doesn't go far enough if it doesn't solve this basic conflict of interest where the rating companies are paid by the people they're rating.

Chiotakis: OK. Marketplace's Gregory Warner with us live this morning from Philadelphia. Gregory, thanks.

Warner: OK, thanks.

Follow Gregory Warner at @radiogrego