Send a Tweet
Most Popular Choices
Share on Facebook 8 Share on Twitter 1 Printer Friendly Page More Sharing
OpEdNews Op Eds    H2'ed 4/15/13

S&P's Utterly Bogus 1st Amendment Defense

By       (Page 1 of 2 pages)     (# of views)   3 comments, In Series: Credit Rating Agencies
Author 30887
Message David Fiderer

(Article changed on April 15, 2013 at 14:14)

In seeking to prevent the South Carolina Attorney General from filing a lawsuit, Standard & Poor's attorneys, Cahill Gordon & Reindel, asserted one of the most fatuous legal arguments of the 21st century. "Credit ratings are fully protected by the First Amendment," they claimed.

Here's how Cahill Gordon partner Floyd Abrams put it to The New York Times:

It shouldn't change the legal dynamics that rating agencies are more important, or play a greater role, or are looked to by this or that element of the marketplace...The major similarity here is that both the newspaper and S.& P. are offering opinions on matters that people can and do disagree about.
Really? A credit rating is just like an opinion published in a newspaper? Mr. Abrams should Google the words "Henry Blodget."



(Image by Funky Tee)   Details   DMCA

by Funky Tee

Journalistic Opinions Versus Professional Opinions

Blodget wrote lots and lots of opinions about different companies. Most of those opinions were published by media outlets, and some of them were published by Merrill Lynch, where he worked as a securities analyst during the dot.com bubble.  

The SEC went after Blodget for committing securities fraud because he assigned  inflated ratings, i.e. "buy" ratings, to companies like InfoSpace, Inc., 24/7 Media, Inc., and Homestore.com, Inc. when he was an analyst at Merrill.

Blodget never had the audacity to claim that his ratings and opinions for Merrill were merely a "journalistic" effort, for obvious reasons. Every lawyer who ever bought malpractice insurance understands the difference between a journalistic opinion and a professional opinion.  Merrill's and Blodget's work product were regulated by the SEC, the NASD and the NYSE. When he was a securities analyst Blodget wrote professional opinions, which are governed by certain minimal standards of care.

Of course professionals can have different opinions, which is why a patient may seek out a different physician for a second opinion on his diagnosis. But a doctor can still lose his license if he expresses his "opinion" that Oxycontin is appropriate for mild headaches because it is not addictive.

Blodget settled with the SEC, by giving up $4 million and agreeing to a permanent ban from the securities industry.

Guess who else is licensed and regulated by the SEC? S&P and the other rating agencies. The triple-A ratings assigned by S&P and Moody's to various CDO investments were probably more disreputable that Blodget's "buy" ratings for certain dot.com startups.

Yes, the First Amendment does protect the free expression of opinion, which is why newspapers are not regulated and journalists are not licensed. And this is why the Federal Drug Administration never went after John Tierney for touting the unfettered use of Oxycontin.

Journalistic Opinions Versus Legally Sanctioned Opinions

The rating agencies do not publish individual opinions, like those of a security analyst at Merrill. They publish opinions set by ratings committees; a rating is the work product of an institutionalized vetting process, just like the FDA process for approving over-the-counter sale of a new drug, or the process for licensing a new attorney.

These vetting processes never guarantee an outcome--a drug may have harmful side effects for some people, and a licensed physician may demonstrate gross incompetence--but people can be held liable for compromising the integrity of that vetting process.

Next Page  1  |  2

 

Well Said 2   Supported 2   Must Read 1  
Rate It | View Ratings

David Fiderer Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

For over 20 years, David has been a banker covering the energy industry for several global banks in New York. Currently, he is working on several journalism projects dealing with corporate and political corruption that, so far, have escaped serious (more...)
 
Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Writers Guidelines
Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

STAY IN THE KNOW
If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEdNews Newsletter
Name
Email
   (Opens new browser window)
 

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

Fatal Flaws In The Lawsuit Against Fannie Mae Execs, Part 2

Fannie Mae "Accounting Scandal" Discredited In Court

Mortgages, Ed Pinto, And A Vast Conspiracy Of Silence

How Niall Ferguson Invented False Quotes By Paul Krugman

How Paulson's People Colluded With Goldman to Destroy AIG And Get A Backdoor Bailout

Fox News Embraces Cyber-Terrorism to Subvert the Copenhagen Summit