Moody's

For those who are wondering how Silicon Valley Bank could go broke so fast, consider what happened to Mutual Benefit Life Insurance in 1990. The top ratings company for life insurance companies is AM Best and they gave Mutual their best rating of A+ less than two weeks before it went bust. When Best determines the rating they rely on the insurance company to give them accurate data. Any company can fudge the date and Mutual did. A big life insurance company owns a lot of real estate, things like shopping malls, skyscrapers and apartment complexes. The values of real estate holdings go up and down and many companies keep the book value at the purchase price. Some companies use a process call mark to market which means that they periodically appraise property and update the book value. This allows the company to jimmy the books. They know that over time certain properties increase in value while other decrease. If they want their books to look good they can adjust how and which properties they appraise. For properties that they deem to have lost value they do not appraise but those that they feel have increased in value they appraise and then put the new value on the books. This is important for insurance companies since they must keep a certain amount of money on the books to show the ratings company that they can cover the life insurance claims. AM Best makes their money by charging the insurance companies a fee and thus are beholden to the people they regulate. The fox and the hen house. Banks have a similar arrangement with rating companies like Moody's and Standard and Poors. The rating company is paid by the bank and if the bank doesn't like the job they are doing the bank can change rating companies. Moody's had a grade A rating on SVB days before it crashed. A is for banks with the greatest intrinsic financial strength.