“The loss of confidence in structured-finance ratings is at the heart of the current market crisis,” said Ed Grebeck, chief executive of Tempus Advisors, a debt-strategy firm. “For investment banks to go back to the ratings firms and say, ‘Here’s a new structure for you to rate investment grade’—that’s shocking to me.”

The Fed likes to pretend it’s not taking on junk as collateral in its cash drop on Wall Street. Bull.

The loans in the pool included debt that was issued to finance last year’s leveraged buyouts of First Data Corp. and TXU Corp., a person familiar with the matter said.

A number of Wall Street executives called Lehman’s move “brilliant” and said they may follow suit. One senior finance executive at a rival of Lehman’s said his main reservation with Lehman’s move was that it might lead to criticism that Wall Street is taking its junk to the Fed for cash…

“It’s a very creative way for investment banks to get liquidity from assets that they don’t want to sell at fire-sale prices,” said Todd Kesselman, managing director of Precision Capital…

How Moody’s got greedy

The WSJ has a damning A1 report on the big cultural shift at credit-ratings firm Moody’s that fostered the epidemic of mortgage-bond overrating that fed the housing bubble.

Beginning in the late 1990s, Moody’s attitude toward the financial institutions whose debt products they rated moved from adversarial to overly accommodating—a stance that was more appropriate for the industry’s conflict-of-interest laden business model. Business soared, with profits up nearly five times in six years by 2006.

Here’s the lede:

Bond-rating agency Moody’s Investors Service used to be an ivory tower of finance. Analysts were discouraged from having a drink with a client. Phone calls from bankers went unanswered if they rang during intense, almost academic debates about credit ratings.

A decade ago, as the housing market was just beginning to take off, Moody’s was a small player in analyzing complex securities based on home mortgages. Then, Moody’s joined Wall Street and many investors in partaking of the punch bowl.

A firm once known for a bookish culture began to focus on the market share that affected its own revenue and profit. The rating firm became willing, on occasion, to switch analysts if clients complained. An executive overseeing mortgage ratings went skydiving with a client. By the height of the mortgage-securities frenzy in 2006, Moody’s had pulled even with its largest competitor, rating nine out of every 10 dollars raised in these instruments. It gave many of the bonds its coveted triple-A rating.

The story focuses on Brian Clarkson, now president of the firm and the exec who led the about-face in its structured-finance unit, overhauled its ratings to enable higher ratings, and fired cautious analysts in favor of those who puffed up the ratings.

Have fun in front of Congress, buddy.

Of arbitration and litigation at nursing homes

Also on page one, the Journal writes that nursing homes are increasingly requiring patients and their families to sign away their right to sue before they enter the homes.

The clause can have profound implications. Nursing homes’ average costs to settle cases have begun dropping, according to an industry study, even as claims of poor treatment are on the rise. The industry notes arbitration is slicing the number of patients winning big punitive judgments, the added penalties for severe negligence that can pump up the size of jury awards. Meanwhile consumer advocates, plaintiffs lawyers and even some arbitrators are decrying the practice. Two U.S. senators on Wednesday introduced legislation to effectively ban nursing homes from using agreements that compel arbitration in advance.

The WSJ says the move is part of a broader trend of companies trying to prevent lawsuits by bypassing “emotion-laden juries.” But it reports that the largest arbitration firms typically won’t take nursing-home cases on since patients “really are not in an appropriate state of mind to evaluate” it. The Journal notes that arbitration awards against companies are typically less than jury awards, and quotes an arbitrator estimating that they’re less by about two-thirds.

The (down) beat goes on

In economic news, a WSJ survey of economists finds that three-quarters say the economy is in recession and hasn’t yet hit the trough. They expect unemployment to rise to 5.6 percent by the end of the year. Sixty-seven percent say home prices won’t turn around until sometime in 2009.

Initial jobless claims declined much more than expected last week, to 357,000 from 407,000, but the total number of unemployed rose to a near four-year high, Bloomberg reports.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.