Courtesy of Pam Martens.
Someone needs to instant message Standard and Poor’s Financial Services LLC a legal tip: when you’re in a hole, stop digging. That would be potentially more sage advice than it’s currently getting from the three law firms representing it in its court battle with the U.S. Justice Department over the alleged bogus ratings it assigned to subprime Residential Mortgage-Backed Securities (RMBS) and Collateralized Debt Obligations (CDOs) in the run up to the Wall Street financial collapse in 2008.
In a court filing yesterday, S&P attempted to cast aspersions on the motives of the government in bringing the suit, telling the court:
“Plaintiff commenced this action in retaliation for Defendants’ exercise of their free speech rights with respect to the creditworthiness of the United States of America. Such free speech is protected under the First Amendment to the United States Constitution and the retaliation, causing and embodied in the commencement of this impermissibly selective, punitive and meritless litigation, is unconstitutional. Only S&P Ratings downgraded the United States and only S&P Ratings has been sued by the United States…”
The reality is, only S&P built the government’s case with internal memos, emails, instant messaging and even a song and dance number showing gross disregard for the welfare of the financial system of the United States, investors and homeowners, as it plotted how to “massage” its ratings to grab revenues and market share from its competitors. The ratings agencies, including S&P, are paid huge fees to rate investments by the very Wall Street firms that will benefit from an attractive rating, such as AAA.
In some kind of pathetic gesture of adding credibility to its free speech argument, S&P has hired Floyd Abrams, the constitutional law expert, as one of its attorneys.
The U.S. government filed its complaint against S&P, a division of the publishing powerhouse, McGraw-Hill Companies, Inc., on February 4 of this year. The complaint reveals, for the first time, just how much early warning S&P had to the epic housing collapse that was to overtake the U.S. economy a few years later. According to the government, its overriding priority of increasing revenues and market share drove its decision to stall in making its findings public in the form of credit downgrades.
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