OpEdNews Op Eds

Who in the World would trust Standard and Poor's?

      (Page 1 of 2 pages)
Related Topic(s): ; ; ; , Add Tags Add to My Group(s)

Must Read 6   Well Said 4   Interesting 3  
View Ratings | Rate It

opednews.com Headlined to H2 8/5/11

Author 3863
Become a Fan
  (122 fans)
- Advertisement -


Standard and Poor's finally did it.  They downgraded the credit rating of the United States from AAA to AA+.  There are serious questions about the reliability of S&P.  The White House pointed out that there is a $2 trillion error in the calculations used for the downgrade.  Ths is of interest since the two other agencies failed to change the AAA status of the US.  (See Robert Oak, Economic Populist)

Jack Tapper of ABC News reported late this afternoon:

"A third official says that S&P made a "serious mistake" in its analysis, "based on flawed math and assumptions," so the Obama administration is pushing back. But even though "S&P has acknowledged its numbers are wrong, it's unclear what they're going to do.," the official said.

"S&P's numbers were off by "roughly $2 trillion," the official said.

Fitch and Moody's reaffirmed the AAA US rating earlier in the week.

In addition to the question raised about a mathematical error, there are substantial reasons to doubt S&P for any credit rating, let alone the sovereign debt of the United States  This material is from an article on April 25, 2011.  It is highly relevant to the situation at hand.

They Helped Trigger the Financial Collapse

- Advertisement -

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)

Did S&P and Moody's have a sudden epiphany about their ratings of risky investments?

The report goes on:

"The evidence shows that analysts within Moody's and S&P were aware of the increasing risks in the mortgage market in the years leading up to the financial crisis, including higher risk mortgage products, increasingly lax lending standards, poor quality loans, unsustainable housing prices, and increasing mortgage fraud. Yet for years, neither credit rating agency heeded warnings -- even their own -- about the need to adjust their processes to accurately reflect the increasing credit risk." US Senate Permanent Subcommittee on Investigations, April 13 (p. 268)

- Advertisement -

The Senate investigation found that S&P succumbed to pressure for AAA ratings from Wall Street and big banks for their very risky mortgage backed securities (MBS) and other financial instruments that fueled the real estate bubble. That pressure resulted in high credit ratings while, according to the report, S&P knew from 2003 on that there were "increasing risks" in the MBS market. It seems S&P succumbed to pressure from their customers on Wall Street and the big banks

"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."

Next Page  1  |  2

 

http://www.opednews.com/author/author3863.html

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Follow Me on Twitter

Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
- Advertisement -
Google Content Matches:

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Ukraine President Once Agent for U.S. State Department

Worst President Ever - Barack H. Obama

It's official! You're on your own

Rigged Elections for Romney?

Real Unemployment at 23% - Dampening the Excitement

Humiliation And Death As A Tool Of National Policy

Comments

The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
13 people are discussing this page, with 24 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)
They are even worse than I thought.Outstanding bac... by Dante DeNavarre on Saturday, Aug 6, 2011 at 1:06:35 AM
The Levin committee on the 2008 crash names S&... by Michael Collins on Saturday, Aug 6, 2011 at 1:22:22 PM
In a class action for damages but I don't know any... by BFalcon on Saturday, Aug 6, 2011 at 9:17:53 PM
Obomber administration for their bribery induced A... by bogi666 on Saturday, Aug 6, 2011 at 7:29:12 AM
You make a good point.  Insider trading shoul... by Michael Collins on Saturday, Aug 6, 2011 at 1:28:43 PM
As has been stated before, the ratings agencies ar... by Lois Gagnon on Saturday, Aug 6, 2011 at 8:55:20 AM
Indictment and prosecution for the perpetrators!&n... by Michael Collins on Saturday, Aug 6, 2011 at 1:32:24 PM
Wishful thinking, maybe, but we need to petition O... by Dante DeNavarre on Saturday, Aug 6, 2011 at 3:56:25 PM
it is hard to trust them agian.... by poks her on Saturday, Aug 6, 2011 at 9:16:04 AM
The system broke itself.  It cannot be put ba... by Michael Collins on Saturday, Aug 6, 2011 at 1:34:22 PM
I'm with you Michael and fully agree. At issue is ... by Elizabeth Hanson on Saturday, Aug 6, 2011 at 1:41:54 PM
The state and local banking processes are a nice a... by Michael Collins on Sunday, Aug 7, 2011 at 12:26:50 AM
dysfunctional purposely by the Repubicans. Mitch M... by bogi666 on Saturday, Aug 6, 2011 at 2:22:45 PM
Christina Romer former Chair of the Council of Eco... by Robert Wolfe on Saturday, Aug 6, 2011 at 1:45:26 PM
Excellent article Michael. I believe that Standard... by Howard Schneider on Saturday, Aug 6, 2011 at 2:01:00 PM
They do need to be investigated.  There's a g... by Michael Collins on Sunday, Aug 7, 2011 at 12:18:54 AM
Antitrust Review In November 2009, ten months afte... by Daniel Geery on Saturday, Aug 6, 2011 at 2:49:47 PM
S&P unfair and monopolistic practices, no way;... by Michael Collins on Saturday, Aug 6, 2011 at 4:47:52 PM
S&P unfair and monopolistic practices, no way;... by Michael Collins on Saturday, Aug 6, 2011 at 4:48:39 PM
The Patriot Act, Section 802: A person engages in ... by Robert Wolfe on Saturday, Aug 6, 2011 at 5:22:24 PM
Valuable information and analysis!... by Michael Collins on Sunday, Aug 7, 2011 at 12:33:21 AM
Standard and Poor;They do NOT adhere to any known ... by Arend Rietkerk on Saturday, Aug 6, 2011 at 7:00:41 PM
"Trust" has been transformed into meaning "What's ... by Marika on Sunday, Aug 7, 2011 at 2:37:40 AM
"With the failure of the electoral system, the leg... by Nancy Lewis on Sunday, Aug 7, 2011 at 7:58:53 AM