I like a good sense of humor as much as anyone. So, I tip my hat to the people over at Standard and Poor’s — especially the legal department — for giving me a chance to just have a good ‘ole belly laugh. You see, all that stuff about S&P’s culpability in the mortgage scam that robbed millions of people of their jobs and savings is just made-up, and, to boot, the lawsuit filed by the Justice Department is “political retribution.” Seriously. Now, c’mon, did you laugh or not?
The chuckle comes via The Wall Street Journal (behind the paywall):
Standard & Poor’s Ratings Services escalated its legal battle with the U.S. Justice Department, accusing it of filing its $5 billion lawsuit against S&P in “retaliation” for the company’s downgrade of America’s debt in 2011.
S&P’s defense, made in a court filing on Tuesday, shows that the world’s largest credit-rating company is digging in as it fights the Justice Department’s Feb. 4 lawsuit, which accused S&P of misrepresenting its rating process in the years before the financial crisis.
The Justice Department said that federally insured banks and credit unions bought debt deals rated highly by S&P because they thought such top-notch ratings indicated there was less risk than lower-rated securities. But behind the scenes, the government alleged, S&P was assigning high ratings to deals in order to please bankers and other clients. S&P has said such claims are “meritless.”
S&P has previously indicated that it believes the U.S. lawsuit was politically motivated, but the language in Tuesday’s court filing is its strongest to date.
Okay, so, now if we can leave the Comedy Club and get back to the real world — the real world of facts.
We’ve known for a long time that the ratings agencies are not independent, that they are tools of Wall Street and, thus, the suit by the Feds accusing S&P of fraudulently rating mortgage bonds is not some vendetta or “retribution.” It’s a very tiny effort at holding people accountable. With the caveat I have made for a very long time: the actual people who broke the law never go to jail — little fish get tagged but the big fish get away and the fines trumpeted to settle case (in which the institutions never admit they broke the law) get paid out of corporate tills and, thus, ultimately, shareholders and customers pay the freight.
A pesky little fact: as I wrote almost a year ago, S&P has already been found guilty in Australia of deceiving and misleading investors as part of a complex derivative that collapsed two years after it was created. So, the notion that poor S&P is the target of “retribution” is comical.
Though I do thank, again, the S&P folks for having the gall to make a very hilarious argument.