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Geithner vs. S&P

Hmmm:

Former U.S. Treasury Secretary Timothy Geithner angrily warned the chairman of Standard & Poor’s parent that the rating agency would be held accountable for its 2011 decision to strip the United States of its coveted “triple-A” rating, a new court filing shows.

Harold McGraw, the chairman of McGraw-Hill Financial Inc , made the statement in a declaration filed by S&P on Monday, as it defends against the government’s $5 billion fraud lawsuit over its rating practices prior to the 2008 financial crisis.

McGraw said he returned a call from Geithner on Aug. 8, 2011, three days after S&P cut the U.S. credit rating to “AA-plus,” and that Geithner told him “you are accountable” for an alleged “huge error” in S&P’s work.

“He said that ‘you have done an enormous disservice to yourselves and to your country,’” and that S&P’s conduct would be “looked at very carefully,” McGraw said. “Such behavior could not occur, he said, without a response from the government.”

First, I should note one thing: Geithner was right, as it happened. S&P had a made a $2 trillion error in their calculations. They stand by their rating, citing the bad environment in Washington and bad budget outlook.

Second, the threat itself doesn’t matter too much to me. I would expect any Treasury Secretary, faced with a potential downgrade, to scream blue murder and/or try to talk the rating agency out of it.

Third, the $5 billion lawsuit against S&P is long overdue. It is now well know that the ratings agencies avoided looking too deep into the CDO’s, in particular, giving AAA ratings to what were, in reality, massive piles of high-risk mortgages. It is documented that auditors at the agencies were told not to look into the securities they were rating lest the lucrative derivative market dry up. People like John Paulson and Michael Burry, who did their homework, made massive fortunes betting that the towering piles of shit S&P was giving AAA ratings to were going to fall over. And men like Howie Hubler, who didn’t and relied on S&P, lost billions inadvertently betting piles of mortgages against themselves.

So, Geithner was right about S&P, complaining about the downgrade was reasonable and S&P are a bunch of crooks. So nothing to see here, right?

Wrong.

Here’s the problem: the lawsuit came after S&P’s downgrade. And Moody’s and Fitch, who were just as complicit in the meltdown as S&P, have not been sued. When you throw into this mix that Mark Zandi, one of the founders of Moody’s and someone who completely missed the real estate bubble, has been spending the last five years peddling Obamanomics, making bullshit economic projections to support Obama’s policies and doing everything he can to support their Keynesian nonsense … well, it does start to look a bit suspicious, doesn’t it?

Obama has done very little to punish the high-end crooks for their part in the meltdown. I think we’re beginning to see why. Because most of them have played ball with the Administration. S&P hasn’t. And so, for once and for entirely the wrong reasons, the Administration is doing the right thing.

No, the scandal is not that S&P is being sued. The scandal is that everyone else isn’t. Because as far as this Administration is concerned, you can lie to investors and creditors; you can fail to do anything approaching your job; you can bilk people out of billions. But don’t you dare contradict the Administration on economics. That’s serious.

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  1. AlexInCT says:

    Third, the $5 billion lawsuit against S&P is long overdue. It is now well know that the ratings agencies avoided looking too deep into the CDO’s, in particular, giving AAA ratings to what were, in reality, massive piles of high-risk mortgages.

    Oh, that’s pure bullshit. This lawsuit is pure and simple payback, and the SOP for this administration. You cross them, they try to destroy you. S&P did exactly what the democrats demanded at that time and kept playing the shell game the left wanted around because of their social justice agenda of making everyone, even people that could not afford it, get money to buy homes. Had they downgraded these CDO’s they would have had Dodd and Frank calling them racist and demanding they be investigated and sued for daring to point out that the left’s house of cards was not sustainable. Anyone that opposed these crooks and that scam that crashed our economy was villainized. Look it up and stop pretending like this lawsuit is anything but a vendetta against S&P for putting a stop to the left’s trillion dollar plus a year of deficit spending to buy votes campaign. This whole freak show amounts to a kangaroo court distraction to please the masses and a double whammy chance to fuck over S&P, while showing everyone else not to stand against Obama and the donkeys. Or else….

    It’s despicable and backhanded. If they are going to punish S&P they should be right there next to them taking twice the punishment, as it was a crisis of their making.

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  2. Hal_10000 says:

    Alex, S&P was paid by the investment houses. The pressure to rate these things AAA came from them and from the higher-ups. There were hundreds of billions riding on these things. It had nothing to do with Congressional pressure, which was exerted on the mortgage market, not the derivative one.

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  3. AlexInCT says:

    Alex, S&P was paid by the investment houses. The pressure to rate these things AAA came from them and from the higher-ups.

    And who do you think gave the investment houses their marching orders and pushed for these numbers? In fact, who is now filing a punitive lawsuit against S&P for not ignoring the fact they were really destroying the economy (yet again)?

    It had nothing to do with Congressional pressure, which was exerted on the mortgage market, not the derivative one.

    That statement is laughable. The two were part and parcel of the same fucking scheme/scam driven by the social justice progressive movement. I know the narrative has been pushed real hard to separate them from each other so they could keep blaming evil Wall Street and Boosh, while ignoring their role. Wall Street did what the left told it to. That’s why we were told they were “To big to fail” and had billions of our dollars handed to them when the house of cards collapsed. They went along with the insane progressive scheme that violated both human nature and the basic laws of economics because they were told tax payers would foot the bill if (when) things went south. Anyone that dared point out that this thing was doomed and would hurt the country was immediately branded an evil racist and hater of the middleclass and the poor to shut them down.

    You people remain focused on the private sector’s role in the economic collapse and remain unable to see that without the directive, protection, and coercion from government they would never have been doing what they were doing. Our problems are ALL caused by the incestuous relationship between the nanny state government types and those that profit from the shenanigans that these nanny staters push for. Going after the private sector instead of the government is like trying to treat a heart condition by fucking around with the liver.

    The S&P is being sued to make sure everyone else knows never again to dare defy the left’s wishes for them to hide things damaging to the left if they know what’s good for them. It allows the left to pretend that they are doing something noble while literally acting no different than a crime syndicate. Wise up already people. Our worst enemy is the very people, especially in government, pretending to help.

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  4. Hal_10000 says:

    This isn’t either/or Alex. You had pressure from Congress and the White House to expand lending. You also had a market that was sucking up mortgages and selling them, independent of what Washington was doing and making stacks of money. Bubbles happen. They aren’t all the creation of liberals. And that derivate market had gone through this exact same bullshit just ten years earlier on investments that had nothing to do with mortgages.

    I know people want to believe that Wall Street is the font of wisdom and any mistakes are the result of Obama and liberals. But honestly, they completely screwed the pooch on this one. In this case, it just happened to be mortgages. it might as well have been dutch tulips. It was a calamity that people like Michael Lewis saw coming twenty years in advance.

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  5. AlexInCT says:

    I know people want to believe that Wall Street is the font of wisdom and any mistakes are the result of Obama and liberals.

    Only you are trying to pretend that’s the argument being made. I have no illusions about the people on Wall Street being anything but people. And calling the dysfunction caused by liberal policies mistakes does more to show where you stand than I do.

    My point remains that we have a huge problem because we have people that want to play god and pick who wins and who loses, regardless of how insanely stupid and impossible what they want to do is, and they are in an unholy union with people that want to make insane amounts of money at any cost. The regulations and the people that pass them are the problem.

    We keep having a circle where government created a problem through legislation. Things go bad, sometimes real fucking bad, and then the same people that caused the problem demand to be the ones to fix it. And they fix it by doubling down and doing even more of the same. Rinse, repeat.

    The way to break this vicious cycle that keeps repeating and making things worse, is to break the people in government that live for and profit from this thievery. You are a fool if you think the Obama administration is suing S&P for any other reason than to show them who is boss and to make examples of them, and that you seem immune to that is saddening. Ask Corzine, who stole billions, why they have not sued him. This administration is despicable, and S&P is not the only one they have fucked over to make an example of them for others. It’s criminal.

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