A more suspicious person than me could well wonder whether part of S&P’s motivation for the debt downgrade was innoculation against this:
The Justice Department is investigating whether the nation’s largest credit ratings agency, Standard & Poor’s, improperly rated dozens of mortgage securities in the years leading up to the financial crisis, according to two people interviewed by the government and another briefed on such interviews.
The investigation began before Standard & Poor’s cut the United States’ AAA credit rating this month, but it is likely to add fuel to the political firestorm that has surrounded that action. Lawmakers and some administration officials have since questioned the agency’s secretive process, its credibility and the competence of its analysts, claiming to have found an error in its debt calculations.
An indictment would look like retaliation at this moment, wouldn’t it?
Also, too: FSM save us from innumerate reporters and/or chickenshit editors. Isn’t it established fact that S&P made a huge error in its original writeup? Shorter NYT: “Some claim that 2+2 = 4. Others disagree.”
Villago Delenda Est
Well, certainly some would say that it was retaliation for the downgrade of the US Government.
Belafon (formerly anonevent)
Which is one of the reasons there are firewalls between the various agencies, so that the political consequences of one decision don’t affect the administrative decisions of another.
Villago Delenda Est
The third paragraph is pretty telling:
So, the analysts seem to have taken their job seriously, but management, ever conscious of S&P’s own bottom line, overruled them? This tracks with anecdotes about analysts telling bankers that “the market is tapped out, no more growth there” and of course the bankers saying “that can’t be, our growth numbers need to keep going up, lower lending standards to get those numbers up!”.
This Ferengi shit is going to destroy everything in the end.
On edit, oh, and the fifth paragraph:
More like the need for short term profit outweighed any concern about the long term prospects of the financial system…
Interesting that this should come up now. Yes, it does look like retaliation.
The whole fuss and bother about the sovereign debt rating has created an opportunity for the US people to step back from their “We’re number one” position. I’ve been concerned about this for some time and hoping we as a nation could do that without declaring war on anybody and everybody. Maybe we can.
Argue, sue, litigate, lobby, and emote. It might be good for everybody.
Did they claim to find an error or was there, in fact, an error? Oh well, I suppose there’s no way to know! Reasonable people can disagree!
@Villago Delenda Est:
Belafon, I’m sure the firewalls will keep the right-wing noise machine from screaming about political retaliation if the DoJ takes any action against S&P, and if they do scream anyway, no doubt the firewalls will keep the media from paying them any attention.
@Stefan: Opinions do certainly differ.
O RLY? I thought they were just stupid. I didn’t know they were taking six figure payments.
Oh please, I’ll believe it when I see it. Someone in the mortgage fiasco being held accountable? Riiiiiight.
They don’t have the moxie to do it, period. If they did then they’d have to prosecute all the little felons in that tightly woven group.
Heh. Oh yeah, I can see it.
It’s incompetence. Given a choice between conspiracy and incompetence, the right answer is always incompetence. Not to mention that, IMO, a conspiracy would be proof of incompetence. And this is especially true– really and deeply and truly, truly true– if you’re talking about bureaucrats.
Villago Delenda Est
You know what it looks like? S&P retaliating the investigation of their shitty business practices so they downgrade US government securities. If only the government had bribed S&P’s “business managers”, the ones most likely with MBAs from Ivies, like the banks did.
“Nice army you’ve got there, general. It would be a shame if anything happened to it…”
i’ve read a few wingnut comments, here and there, which seem pretty sure it wasn’t an error, but rather a choice to use one baseline over another, or something. in the wingnut universe, this ‘error’ is just another liberal media attack.
Belafon (formerly anonevent)
@KCinDC: I am under no illusion that the firewalls will magically make Republicans reasonable, but after seeing the arguments over why ICE doesn’t work with the FBI and CIA and why the Federal Reserve doesn’t cooperate with other organizations, what happens when something gets politicized is part of the answer.
Where are the complainers who have been screaming on threads for years that the Obama administration was turning a blind eye to Wall Street malfeasance? A Justice Department investigation into ratings agencies doesn’t sound like a blind eye. Not as immediately gratifying as banksters jumping out windows or being dragged into the street by the tie and publicly tried, drawn and quartered, but it looks like we may end up seeing a measure of justice on this issue after all.
I think S&P thought the other rating agencies would follow their lead to downgrade US bonds and that would give them more leverage, but since no one did, it looks like a threat, based on bad math, and yeah I don’t think that’s going to stop the JD investigation.
An effective indictment would cite the gross apparent misfeasance of the debt-ceiling downgrade to reinforce the charge of suspected fraud.
Or does the DOJ adhere to the “strategy” of pathological bipartisanship like other departments of the administration?
This is not to mention “putting behind us” previous atrocities so to effectively invite the next, even worse, atrocity.
2nd para of the Times piece:
So they were looking at S&P’s mortgage ratings before the US credit downgrade. Clearly the investigation is not direct retaliation for the downgrade. Expect that inconvenient fact to be ignored by the Right.
I hope this investigation has been going on for a while. It would be great to see prosecutions between now and 11/2012. One more thing to focus on the real causes of the recession.
I tried to tell my wingnutty neighbor after the downgrade that S&P was in bed with big money interests, and he wouldn’t hear it. “That’s just not possible,” he said. “They have to be objective and neutral or the whole stock market falls apart.” Um, yeah. I think I’ll e-mail him this link now.
The question that comes to mind is: who told the media that Justice was investigating?
It does look like innoculation; or maybe pre-emptive fire is a better description.
Possibly, which is why a competent administration would have looked into these ratings agencies much sooner.
I wish Congress wouldn’t waste its time trying to “investigate” the downgrade decision. They’re not going to find a smoking gun (“hey guys, let’s downgrade Treasuries to inoculate ourselves against the DOJ investigation!”) and it feeds the retaliation narrative in a serious way. This DOJ investigation is much more important.
This is why I think there has to be some Pullback at this point.
To a great extent money is whatever everyone agrees it is. This foundation, rocked by financial institutions who mistook the appearance of solvency as its actuality,has only been worsened by the Tea Party’s mistaking their use of a credit card for understanding of actual governance.
SOME of them, I hope, have lost their taste for gambling. It doesn’t matter how many toys you die with when Crazy Azzholes are poised to trigger the sun going nova.
The MSM dares criticize the Tea Party. They are going to split off.
No! Really? Good thing that the shit ton of shaky investment vehicles that were given the best possible ratings in no way bears out this contention.
@TK421: The DOJ started this probe at least a year ago, maybe eighteen months ago, IIRC. Its’ just been slow because they’ve been sweeping up after a lot of other violators.
If S&P management was taking what can be construed as bribes for improperly high ratings of mortgage derivates, how can you stop with S&P? Wouldn’t you have to follow the leads to the persons or institutions doing the bribing as well?
@Original Lee: Not good enough! It should have started on January 20, 2009, while Obama was wasting time watching some damn parade! Anything else is gross incompetence.
Sorry to jump in, TK421. Just saving you a little time.
It isn’t a bribe, it’s a fee for service. Any correlation between the amount of the fee and the resultant rating is strictly coincidental – or so they’ll say.
CNN just had the reporter from the NYT front page piece on, saying that the people she’d interviewed had been contacted by DOJ earlier this summer.
Culture of Truth
Everyone knows litigation is just like Law & Order, where cases are investigated in the morning, filed in the afternoon and wrapped up by sundown.
A trillion here a trillion there and soon you’re talking real money.
Villago Delenda Est
@Culture of Truth:
If only that were true, as we’d get a lot more Lenny Brisco snark.
Did it escape his notice that the whole stock market did, in fact, fall apart? It was in all the papers.
@Stefan: I have no idea what he meant by that. I was too flabbergasted. Maybe he meant that the brokers wouldn’t know whom to trust anymore, or something.
Does anyone think that the issue was S&P negotiating with the administration to drop the inquiry, and then when the did not, they lowered the US credit rating? Was the credit rating the threat? And not lowering it was the offer on the table?
We’ll keep your AAA rating if you stop this particular investigation…
@Villago Delenda Est: This Ferengi comparison is completely unfair, to the Ferengi.
As far as I recall, the Ferengi system was indeed devoted to the principle of the continued existence of the Ferengi system, because without it, profit was impossible.
Today’s corporate and investor leadership would be considered dangerous unprincipled radicals by the Ferengi.
I think it would be more accurate to say: “Shorter NYT: ‘Some say 2+2=5. Others disagree.'” That way the benefit of the doubt is given to those peddling horsesh*t.
I found this to be an interesting link
We are now in S and Ps AA+ group with Belgium and New Zealand. quite frankly I do not see how we belong on a group with such varied ratings and dept ratios. Belgium is on par with us, New Zealand has only 30percent. However we are on scale with Greeece, Ireland, Portugal, and Spain. These countries are experiencing massive default and credit problems. Is it really a wonder that we have been downgraded?
Interesting sidenote. Compare the CIA’s analyses of our Debt with the IMFs analyses. The CIA says we only have 60% of our economy as debt. I thought we had a 15trillion dollar economy and a similar sized debt, as the IMF says. Anyone care to explain this too me?
Ahh wont let me edit! the link didnt work
Retaliation or not, it is time to held the rating agencies accountable. It is not acceptable for so much power to be concentrated in the hands of such few companies and let them dictate government policies.
MattF regurgitates what he is instructed to think.