Streams

Allegations of Fraud Against S&P

Wednesday, February 06, 2013

Traders work on the floor on the New York Stock Exchange on April 18, 2011 in New York City following news that Standard and Poor's had cut its long-term outlook on U.S. debt to negative. (Getty)

The U.S. Justice Department has brought civil fraud charges against the credit-ratings agency Standard & Poor's. Felix Salmon, finance blogger for Reuters, explains what the suit means.

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Comments [7]

fuva from harlemworld

Jim, yes, I hear ya. Of course the banks and govt agencies were/are complicit.

Feb. 06 2013 11:28 AM
Jim

@fuva

I understand the the government was not a proper "investor". However, the powerful players in the business knew that the government would step in. I worked in an ancillary banking business during the real-estate run up and participated in numerous water cooler conversations about the likely role of the US Treasury and Federal Reserve in the coming real estate crash.

What few reporters discuss, is that the Treasury and Goldman Sachs had been actively propping up the stock market for years through manipulation of the options market (no coincidence that Henry Paulson went from Goldman to Treasury). The culture of corruption started in the early 1990s and was solidified long before the recent crash. The rating agencies knew this. I hope that the lawsuits cause the ratings agencies to subpena the Treasury, Goldman, and the Federal Reserve about market manipulation.

Feb. 06 2013 11:22 AM
Joe from nearby

Felix Salmon is awesome. Please have him on more often!

Feb. 06 2013 11:05 AM
RUCB_Alum from Central New Jersey

A DOJ prosecution against the S&P?!? That's a little like the pot calling the kettle black, isn't it? The bubble that became the mortgage meltdown was fed by six years of FEDERAL deficit spending that HAD NO IMPACT on the country's own bond rating! From FY'01 to FY'09', Dubya and the GOP cranked a $5T national debt that was projected to fall to zero dollars in ten years and gave tax cuts, fought wars and increased entitlements so that the national debt doubled to $9.5T. That's a $15T swing that the S&P somehow didn't notice or let impact our bond rating. You wanna blame someone, look in the mirror.

Feb. 06 2013 11:04 AM
fuva from harlemworld

"Everyone else was doing it too" is obviously a dubious defense. But also, the ratings agencies -- unlike the govt and everyone else -- were actually looking at and charged with analyzing granular data clearly showing the poor quality of these products.

And, Jim, the govt was bailing out not acting as a conscientious investor.

Feb. 06 2013 10:59 AM
Jim

Were the ratings agencies really wrong to say that these products were as safe as those offered by the US government? The bonds were certainly backed by bad risks, but as it turns out, the government took them all onto their books at AAA prices. So the ratings agencies were actually correct that these bonds would ultimately be safe for their institutional holders.

Feb. 06 2013 10:56 AM
NSNY from Bklyn

Your guest is wrong. Hunters have already spoken-up and said that there's no need for these assault riffles, that you wouldn't even be able to eat an animal that was shot with one.

Feb. 06 2013 10:47 AM

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