Decline and Fall - Why Would Anybody Believe Standard and Poor's?

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Decline and Fall - Why Would Anybody Believe Standard and Poor's?

Michael Collins

(Regarding Standard and Poor's threats to downgrade the sovereign credit rating of the United States of America)

Who in the World Would Trust Standard and Poor's - They Helped Trigger the Financial Collapse

Along with Moody's, S&P abruptly burst the real estate bubble and triggered the 2008 recession. Their downgrading of mortgage backed securities followed years of the highest ratings for these risky financial products. According to a US Senate committee report:

"Although ratings downgrades for investment grade securities are supposed to be relatively infrequent, in 2007, they took place on a massive scale that was unprecedented in U.S. financial markets. Beginning in July 2007, Moody’s and S&P downgraded hundreds and then thousands of RMBS and CDO ratings, causing the rated securities to lose value and become much more difficult to sell, and leading to the subsequent collapse of the RMBS and CDO secondary markets. The massive downgrades made it clear that the original ratings were not only deeply flawed, but the U.S. mortgage market was much riskier than previously portrayed." (Author's emphasis) US Senate Permanent Subcommittee on Investigations, April 13 (p. 263)

"S&P Intentionally Underrates Public Bonds"



The heading above is a section title from the 2008 State of State of Connecticut complaint filed against S&P for "unfair and deceptive acts and practices in the courts of trade or commerce within the State of Connecticut."

The Connecticut Attorney General issued the following statement after filing the complaint against S&P:

"We are holding the credit rating agencies accountable for a secret Wall Street tax on Main Street"

"All three credit rating agencies systematically and intentionally gave lower credit ratings to bonds issued by states, municipalities and other public entities as compared to corporate and other forms of debt with similar or even worse rates of default, Blumenthal alleges" Richard Blumenthal, Connecticut Attorney General, July 30, 2008 (Blumenthal is now governor of Connecticut)

Link: http://economicpopulist.org/content/decline-and-fall-why-would-anybody-believe-standard-and-poors