Interesting Timing: News Leaks That Justice Dept Is Investigating S&P Just After It Downgrades US?
from the uh-huh dept
So just a couple weeks after S&P's (overhyped) downgrade of US debt, a story leaks that the Justice Department is investigating the S&P's ratings system. The reports say that the Justice Department investigation began before the downgrade -- which I absolutely believe to be true. It also notes that the focus is on conflicts of interest and a quote from an S&P managing director about not killing "the golden goose."But, here's the thing. The timing of the news of the information getting out is certainly questionable. Even if the investigation is about mortgage debt, not sovereign debt, and even if it started before all this, just having it come out so soon seems like a clear shot at ratings agencies: downgrade the government and we'll ramp up our investigations of you. Does an action like this give Moody's or Fitch pause before changing their ratings on US debt? The report notes that it's "unknown" if only S&P is being investigated, or if all three are, which certainly seems like fair warning: downgrade us and we'll leak some dirty laundry.
As for the legitimacy of the investigation, again it seems to all go back to the fact that these firms ratings are seen -- in part due to US regulations -- as gospel fact, rather than just another opinion on value. That's a problem. Perhaps there's a case to be made that S&P's ratings people believed one thing while publicly stating another, and that can be turned into a fraud claim, but it seems like it may be a difficult case. A rating is still an opinion and an opinion is protected free speech. Getting over that hurdle is possible, but difficult. It seems like a much more effective way to stop S&P from abusing the system is to stop forcing organizations to treat its ratings as gospel. I would bet that would do a lot more damage than any lawsuit or criminal action against the company or its execs.
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Filed Under: downgrades, investigation, ratings
Companies: s&p
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Ratings Agencies
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from the first paragraph of the NYT source article:
"...according to two people interviewed by the government and another briefed on such interviews...."
later:
"Even though the Justice Department has the power to bring criminal charges, witnesses who have been interviewed have been told by investigators that they are pursuing a civil case."
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Not looking for the smoking gun
Taking the teeth away from some of these ratings agencies may bring about some useful reform. Basing these kinds of decisions on more fact that emotion, or political followings.
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The reason they might be pursuing a civil action rather than criminal is well the Government gave them the laws they needed to hoodwink everyone. Opening that can of worms in court might cause even more problems, but a civil action pointing out that the company was aware of serious problems with things rated AAA and continued to push them and profit from those ratings as fraud can side step the examination of the rules.
Civil rulings have lower evidence requirements, and I am sure just looking at the most toxic assets being rated AAA until the very end, while staff discussed how bad these things really were should make the case.
There will be some sort of fine, and S&P will behave for a little while. This will not change the underlying structure of how they do business or the laws governing it, but will show the people the Government is "concerned" about them. Plus the added bonus of creating the impression for some that this is because of the downgrade, while pundits will seize on this and demonize it... it might put some fear into the right people who will stop using some of the loopholes.... until they think no one is paying attention.
Whatever it works out to be, this is going to generate alot of talking heads talking. Everyone will spin it to suit their narrative, and nothing real will change.
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Overhyped?
I don't think the actual downgrade was overhyped, unless you are talking about the subsequent (financially incompetent) media coverage. The downgrade came out at 8:30 pm ET on a Friday. If they wanted it to be overhyped almost any other time throughout the week would have been more appropriate. The way it happened, they gave investors, bankers and politicians the weekend to figure out what the fuck to do. What would have happened if they waited to 10 am on Monday and then through it in the mix?
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Re: Not looking for the smoking gun
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Hej Fund the Hedgehog
If this were Ebert & Siskel rating a movie, that would be one thing, but no one gets a big position with S&P unless they have power & influence over financial institutions and governments. Are the puppet masters coming out of the closet? Nah. Voters should be so fortunate as to actually know how things really work in this world.
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Well, ya use the hammer ya got, Mike, instead of ninnying
This is the 3rd piece where you say let poor little S&P alone, a clear pattern of siding with an iconic Wall Street firm for no /obvious/ reason. You've pointed out their fraud but don't want them investigated AT ALL.
his is LONG overdue, and it's irrelevant whether NOW is due to retaliation. Let's just hope that some good comes of it, not just another whitewash by corrupt gov't officials of their pals in fascism.
But I bet that it's limited hangout at most, so don't wring your hands any more, Mike. It's all theater.
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The financial system is quite obviously *rife* with corruption, plus it would do far more for the 'good of the people' than seizing web domains of gambling or similar sites.
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"And this is Tom, he's investigating... well... everybody, all the time. That way if anything ever comes up, we can honestly say we were investigating before hand."
*Tom stops playing Angry Birds for three seconds* "and the benefits are great too!"
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Re: Ratings Agencies
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The timing on this, however, is less than stellar.
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Culture Of Scheming
Do your own due diligence, every time. Luckily, that is easier than ever, now that we have the delights of the internet. Read Warren Buffett, he says a lot of good and useful stuff. But he is a bit naive about how many corporate psychopaths there are out there. Sure they are nice people, Warren, they are always going to be on their best behavior near you. See how they treat their lowly-paid staff or their ordinary shareholders, then you will see what they are really like.
Statements from the New York banks and their friends are not to be trusted. The friends include: the ratings agencies, the financial press and the US government.
The key to understanding America is to work out who is lying to who and why.
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The US Govt Has No RIght To Investigate Standard & Poor’s
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Re: Ratings Agencies
Although some have tried.
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Different Ratings
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Re: Re: Ratings Agencies
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Re: The US Govt Has No RIght To Investigate Standard & Poor’s
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Re:
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S&P
If management is venal enough to prostitute the company product for Angelo Mozillo,then management may be venal enough to be responsive Justice dept interest and to the administration's concern about the sudden GOP mania for national bankruptcy.
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