The global financial crisis happened in the fall of 2008 and in the beginning of 2013 we’re still looking for people to place the blame on. Big banks have been sued for laughably small amounts and some companies have kicked out CEOs, but the most surprising 2008 crisis call out happened this past Monday.
Standard & Poor’s (that S&P thing media personalities occasionally mention when they’re giving out terrible investment advice) is a pillar of the American financial sector. S&P has been around since 1860, they’re largest credit rating firm in the country, and they publish financial research and analysis on the stock market that people read like a fiscal holy book.
On Monday the US Justice Department filed civil fraud charges against the company, claiming that the company mislead the country by giving glowing appraisals to unstable securities and down played the true risk of the looming credit crisis that managed to screw up the global economy. According to the government S&P misled investors by claiming their ratings and financial information was “uninfluenced by any conflict of interest”, when they pretty much were unabashedly promoting companies they held a financial stake in. They claim that S&P’s desire to generate more money and earn more market share caused the company to grossly ignore the risks of shoddy investments from about 2004-2007.
Standard and Poor’s immediately went on damage control after the news broke and claimed that they totally knew that the US was gunning for them and they denied any wrong doing. Their confidence of their innocence didn’t seem to help much since their stock plunged by a little over 20% less than 24 hours after the news became public. The news of S&P’s impending suit was so bad that somehow the shares for Moody’s Corp, S&P’s main rival, to fall by 10.7%.
S&P’s most trumpeted innocence claim is that other credit rating companies managed to screw up as badly as they did. Every mortgage-backed bond that the US Department of Justice review had received the same credit rating S&P gave from different rating agencies. It’s also likely that they’ll defend their terrible mistakes by claiming their first amendment rights since their ratings are really their “opinions” and that they’re protected under the Constitution. Luckily two federal judges have already claimed that any 1st amendment defense would be complete and utter crap.