S&P raises desperate defense against government lawsuit

[Ichingcarpenter]

Everybody wants to see the perpetrators of the financial crisis punished, but you have to feel a little sorry for Standard & Poor's, the credit rating firm being sued by the federal government for its role in the disaster.

S&P clearly has its back to the wall in this case. We can conclude this from the desperate defense it raised in court last week: that federal prosecutors have their knives out for S&P in "retaliation" for its downgrade of the U.S. government's credit rating in August 2011.

As a diversionary tactic, the assertion is brilliant — it certainly got prominent play in newspapers and news websites across the nation. But as a legal claim, it's openly preposterous. And it clumsily sidesteps the main question, which is whether the firm is indeed guilty of fraud.





SNIP


Its lawsuit, filed in February in Santa Ana federal court, cites numerous internal memos and email exchanges suggesting that S&P knew the mortgage market was tanking. Still, the firm maintained glittering credit ratings on mortgage securities to suit its clients — the banks that were issuing the crummy securities and needed to dress them up with AAA ratings before hawking them to investors.

The government contends that S&P committed fraud by continually asserting that its rating process was immune from client pressure and therefore rigorously objective. Investors who bought the mortgage securities thinking an S&P rating was the product of pristine analysis, in other words, got taken.

Over the last few months, S&P has tried out several defenses against the government's allegations. They've been increasingly implausible, but its latest claims, filed in court last week, take the cake.


SNIP


There S&P essentially argues that no one should have taken its ratings seriously in the first place. Its ratings, it says, "are not indicators of investment merit, are not recommendations to buy, sell or hold any security, and should not be relied upon as investment advice."



http://www.latimes.com/business/la-fi-hiltzik-20130908,0,2539608.column



ITS A PONZI GAME.....

[Ichingcarpenter]

1. S&P rates the world for austerity Greece

Spain you name it.


Now think about it.


Its ratings, it says, "are not indicators of investment merit, are not recommendations to buy, sell or hold any security, and should not be relied upon as investment advice."

[Kolesar]

2. S&P's ratings were mere puffery like the old claim about Wonder Bread building strong bodies 12 ways

S&P's latest defense is all of a piece with its previous counters to the federal lawsuit. In April, it sought to get the lawsuit dismissed on the grounds that the statements it made assuring the investment world of the rigor and objectivity of its credit ratings were mere "puffery" that no one was meant to believe, like the old claim about Wonder Bread building strong bodies 12 ways.
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Great recap. Thanks for posting.

Now I ponder where to park my retirement savings if I don't want them in the equities market waiting for another tsunami or a 9/11. Are A-rated corporate bonds to be trusted? I don't know.

[Mc Mike]

3. They downgraded the gov's credit rating,

which caused market uncertainty that threw the stock market for a loop,

which caused investors to take refuge from the financial storm

by buying government bonds,

which they had just adjudged less reliable.


Ponzi, con game, pyramid scheme. That's the stock system.