“This sort of political brinkmanship is the dominant reason
the rating is no longer ‘AAA’” – S&P ratings agency in a research
note.
S&P, a unit of McGraw Hill Financial, is already famous for
having had the balls to strip the US of its AAA sovereign credit rating
in 2011 when the debt-ceiling fight in Washington – an inexplicable
charade for observers overseas – turned from silly grandstanding to
utter brinkmanship, fired on by convoluted political brainstorms and
upcoming primary elections.
In retaliation, or so S&P claimed, and to teach all ratings
agencies a lesson they’d hopefully never forget, the Department of
Justice has put S&P through the wringer and in February sued it –
deservedly – over its role in the financial crisis, i.e. for allegedly
misleading financial institutions about the validity of its ratings.
AAA-rated mortgage-backed securities as the underlying mortgages were
already defaulting? No problem. The DOJ accused S&P of, among other
things, having inflated ratings to pocket fatter fees from issuers.
The other ratings agencies, which all played a similarly egregious
role in the financial crisis but kept their mouth shut and did not
downgrade the US in 2011, have not been hounded by the government. So
S&P claimed that the “impermissibly selective, punitive and
meritless” lawsuit was “in retaliation for defendants’ exercise of their
free speech rights with respect to the creditworthiness of the United
States of America.”
(more)
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