Is S&P Engaging in the Same Old Practices?
Wednesday, September 18, 2013
Concerned that it might be losing out on business, a major ratings agency loosens its standards for analyzing bonds tied to home mortgages. Right away, clients start lining up for gold star, Triple-A ratings on these real estate bonds that might get a lower rating somewhere else. Sound familiar?
Ratings agencies took their share of blame for the financial meltdown five years ago when they gave good grades to bad bonds. On Wednesday, The New York Times reported that Standard & Poor's is engaging in some of the same old practices.
"Their essential response is 'we made these changes for good reasons, and let's talk about what those reasons are, rather than looking at whether it was due to commercial pressures,'" said the Times' Nathaniel Popper. "They say it wasn't because of commercial pressures, it was because the market has changed and we're responding to that."
Earlier this year, the U.S. Department of Justice sued S&P for fraud over its ratings practices in the years leading up to the crisis. Popper said the lawsuit followed after the ratings agency made the changes to its standards.
"But, what we see when we look at the data is that they have sort of continued being aggressive and going after business, continued giving better ratings, even after the lawsuit, and that's interesting," Popper said.
To hear Host Amy Eddings' full conversation with Nathaniel Popper, click on the audio above.