Curious Timing: Justice Investigates S & P


The New York Times is reporting that the U.S. Justice Department is investigating Standard and Poors. It seems they want to take a look at how the rating agency missed the toxicity of mortgage securities. The great financial collapse of 2007-08 was sparked as the housing bubble burst and financial institutions the world over were left holding bundled mortgage securities that had been leveraged and re-leveraged. The question for nearly four years has been why these securities were rated as investment grade when in fact many mortgages were made to people that had a very high liklihood to default.

In the mortgage inquiry, the Justice Department has been asking about instances in which the company’s analysts wanted to award lower ratings on mortgage bonds but may have been overruled by other S.& P. business managers, according to the people with knowledge of the interviews. If the government finds enough evidence to support such a case, which is likely to be a civil case, it could undercut S.& P.’s longstanding claim that its analysts act independently from business concerns. –NYT

Curious that this investigation becomes public on the heals of the U.S. AAA credit rating downgrade. While Justice claims the inquiry began before the downgrade, it is passing strange that it bubbles up to public light now. Why weren’t Holder’s people all over this say, oh maybe like January, 2009? Why do we see only S&P mentioned publicly? Both Moody’s and Fitch had the same ratings failure. Apparently, they are in the clear, for now. Of course it was only S&P that issued the downgrade, to the great displeasure of the Obama administration.

The Holder Justice Department has shown interesting discretion in the matters it pursues. No one can really explain the lack of interest in the Philadelphia voter intimidation case which was dropped. There has been no interest from Justice to look at the practices of Fannie and Freddie, still bleeding billions of red ink, but now we see the administration singling out S&P publicly. Is an axe being sharpened by those who have admitted they keep score?

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Texas native. Conservative small businessman with 31 years experience. Government should roll back the nanny state. No country can tax its way to prosperity. The question isn't who will let me but who will stop me?

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August 18, 2011 6:50 pm

I wonder if the investigation turns up any smoking guns (memos, etc) that specifically state that they can’t mark the securities down because that will crush Fannie Mae, Freddie Mac, and make it impossible to live up to the requirements of the CRA and its cheerleaders in the Democratic Party. Good luck to Holder’s banking cops in finding the *real* culprit behind the 2008 crash.

August 18, 2011 7:37 pm

Texasgalt, there are elements of this situation that come across as being vengeful, looking for pay back, etc. etc. That isn’t really anything new for this admin, though, is it?

Question: Could Repubs in the House put this opportunity to good use in a way that would bring Fannie and Freddie under the microscope? Or is that just wishful thinking on my part?

E Pluribus Unum
August 18, 2011 8:22 pm

I always thought Eric Holder had a ferret face. Which is a shame, because ferrets are actually wonderful creatures.

Queen Hotchibobo
August 18, 2011 10:11 pm

Gosh, it’s almost like they have an “enemies list” or something isn’t it?

August 18, 2011 11:00 pm

It’s a shame. I don’t know who’s really guilty of criminal or grossly unethical conduct, the investment house, the rating agency, or the go-between. But I already know the outcome. Show me the biggest pre-existing campaign contribution money trail to Obama and I’ll show you who gets cleared – or just unindicted with no further comment – by the AG, in the end. Sadly, this is no snark.

August 19, 2011 8:54 am

The “curious timing” I would like to see, being that we are in an election cycle and all, can be found at:
It is a video of an interview on 6/15/11 given by Louis Fisher who is a long standing constitutional expert. It was done at CNSNews.comOnline.
Even if it didn’t go anywhere, and we all know it wouldn’t with Slimeball Harry in charge of the senate, it would make for some interesting/”uncomfortable” headlines leading up to the election. IMO, some intrepid congress critter should get this little ball rolling sometime around July of 2012.