Posted on 01/17/2015 9:37:05 AM PST by Kaslin
The Justice Department is about to put the squeeze on the Standard & Poor's credit rating service for the tune of $1billion, roughly its 2014 profit, and a fine meant to send a message, according to a Jan. 12 report in The New York Times.
The message: Do not tangle with the Obama administration.
The charge: Standards & Poor's analysts misrepresented their sincere opinion of securities, and instead downplayed the amount of risk associated with the securities, specifically Residential Mortgage-Back Securities and Collateral Debt Obligations, in order to ingratiate themselves to the companies issuing the securities.
This charge, which Attorney Eric H. Holder Jr., made Feb. 5, 2013, was completely over-the-top, but we are talking about a $1 billion fine and sticking someone with blame for the 2008 financial crisis.
“Today’s action is an important step forward in our ongoing efforts to investigate – and – punish the conduct that is believed to have contributed to the worst economic crisis in recent history,” Holder said.
Driving the civil action against Standard & Poor's is Stuart F. Delery, the acting assistant attorney general. Delery is the attorney behind the crusade forcing the Boy Scouts of America to welcome homosexuals as both scouts and scout leaders. It made Delery a celebrity lawyer in left-wing legal circles.
The basic DOJ narrative is that because a company hires S&P to rate its products, S&P has an incentive to tilt its analysis in favor of the company and its products. Investors, fooled by S&P's sunny-day analysis, lost money with the securities went south.
Frankly, this narrative is foolish. There is no incentive for a rating agency to be wrong about the risk associated with securities—regardless of whatever emails some idiots sent to each other stating otherwise.
First, what good is the rating from a rating company that it is always wrong?
Second, if the system, where companies pay to have their products rated was prone to abuse, would not everyone get the coveted Triple-A?
The real story, of course, is not about knuckleheads throwing money into a campfire on the say-so of devious S&P analysts, triggering the worst financial crisis since the Great Depression.
The real story is that Standard & Poor's, two days after President Barack Obama signed the Budget Control Act of 2011, downgraded debt issued from the U.S. Treasury from AAA to AA+.
In court filings, people at S&P claimed that then-Treasury Secretary Timothy F. Geithner communicated to them that they would be punished. Until Holder lined up his charges, the rating firm was just waiting for the other show to drop.
The Budget Control Act of 2011 was born of one in a series of standoffs between Capitol Hill Republicans and the president. The act immediately raised the debt ceiling by $400 billion and gave the president authority to raise the debt ceiling another $1.2 trillion.
The BCA was expected to reduced increases in the federal debt by $4 trillion over 10 years, but instead the number was closer to $2.4 trillion.
S&P said it was not impressed.
“We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process,” S&P said in its statement.
This was not a small deal. It was a big deal. In the financial services industry, Treasury debt was and is recognized as the most secure securities available.
Besides being theoretically risk-free, as a practical matter, many organizations, foundations, trusts and other vehicles are required to invest in AAA-rated instruments. The easiest was to meet this requirement is to invest in treasuries, which suddenly had to be dumped to meet fiduciary standards.
For the record: The day Obama signed the Budget Control Act of 2011, federal debt stood at $14.5 trillion, 93 percent of Gross Domestic Product, which is the annual measure of the size of the American economy. On Jan. 15 at $18 trillion, 101 percent of GDP.
Clearly, Obama is more interested in controlling dissent, not the size of federal debt.
Effing disgusting.
Speak truth to this power and they will destroy you.
DO NOT under any circumstances pay any fine to those bastards in Washington due to their OWN failure.
Meanwhile the GOP fingers their noses and fauns over a gavel in silence.
It would be nice to know their end game plans for America.
If they're bold enough to actually say it.
I don’t see the value of the ratings companies. Time after time they’ve rated companies very highly until those companies implode, taking all of their value with them. The correct response, I suppose, is to stop rating those entities who can do them harm. Not rating them at all will probably hurt those entities more than a bad rating.
O should fine himself as he constantly mis represents himself and what he is doing. Call it a LIAR fine.
I agree with you.
I am disgusted that the big Wall Street firms, Citi, J.P.Morgan and others, chose to pay giant pie-in-the-sky fines rather than fighting Holder’s Justus Department (primarily in order to avoid personal criminal prosecution, of course).
If the big brokerages did something wrong, fine. Punish the brokers not the stockholders.
But Standard & Poor’s? They did nothing but their JOB and they are being attacked for it, by-—as the phrase goes-—the full faith, credit and power of the Fascists in charge.
Obama is just like Putin, an evil czar. Both came to power as unknowns and were sponsored by behind the scenes money & power brokers. In power, both have become so power mad that they will punish and break anyone or any business or group which dares to do any act the leader deems opposed to the leader’s wishes. Both use the “law” as a cover for attacking rivals.
Just another example of Official Oppression. But none dare to call it tyranny for fear of reprisal. Our courts are a joke for there is no swift justice as promised in the Constitution and the old saying that “Justice delayed is justice denied” has never been truer.
lol S&P could hit them right back with a BIG downgrade, triggering funds to dump our bonds, and cause Armageddon. lol
Moodys should follow suit, because those ratings agencies shouldn’t tolerate retaliation of any kind, and stick together.
Is there now any doubt that this half breed thinks that he is a coronated dictator? 2 years remaining? Don’t kid yourselves.
Actually, I have read about this and S&P probably does deserve a fine for doing this. We can argue, though, whether them actually getting the fine is payback or not.
Remember the lawsuit against Microsoft for a stupid browser issue?
As soon as MS started throwing $$$ at the RATS, they stopped.
Same with Intel.
‘AAA’ —Extremely strong capacity to meet financial commitments. Highest Rating.IIUC the most accurate rating for the US government would be C.
‘AA’ —Very strong capacity to meet financial commitments.
‘A’ —Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
‘BBB’ —Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
‘BBB-‘—Considered lowest investment grade by market participants.
‘BB+’ —Considered highest speculative grade by market participants.
‘BB’ —Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
‘B’ —More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
‘CCC’ —Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
‘CC’ —Currently highly vulnerable.
‘C’ —Currently highly vulnerable obligations and other defined circumstances.
‘D’ —Payment default on financial commitments.
Was Obama sworn in as President to Destroy the US ? Has Obama done anything to Help the US yet ?
Obama is a gutter criminal and nothing more. He should be tried, convicted and incarcerated. But, don’t expect anything from the craven quisling GOP.
The entire US financial system has become fascist in nature. It starts with the Federal Reserve, an entity that can conjure debt and print money to benefit its member banks, the US Government and its progressive social-engineering schemes. Fiat money and manipulated interest rates are, de facto, political in nature.
The ONLY money of free people is something outside of the control of government and politicians. It could be gold, silver, wheat, computing power or bitcoin. Anything politicians can not control or conjure out of nothing.
Every time I read something that sounds pro-Obama, the freeper always joined in 2004.
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