U.S. government slams S&P with $5 billion fraud lawsuit

Comments (31)
LTR wrote:

Ridiculous… and without merit. S&P’s ratings are protected under free speech.

The reality is that if you were not wise to the fact that the housing market was distorted and you needed a “rating” to tell you that, then you shouldn’t have been in the market anyway.

Feb 05, 2013 2:39am EST  --  Report as abuse
danWin wrote:

Suing S&P is easier than correcting false economic measures and politics. The US is going into the wrong direction and by intimidating its critics it’s getting weaker and weaker. S&P is not perfect but better than Moody’s and Fitch.

By continuing this course, the US will lose its status as superpower in 20 years. I see the European way in the American politics. Very bad!!!! I foresee 200 years of catastrophe for Europe. Nietzsche – 1880′s

Feb 05, 2013 2:55am EST  --  Report as abuse
sylvan wrote:

I hope S&P didn’t actually pay anyone to come up with the defense of its “professional” rating services: that these ratings are merely an opinion, just your everyday free speech. Reminds me of Monte Python’s “merely a flesh wound”. So when you hire a home inspector for example, and he doesn’t actually survey your house before issuing a report, do you pay him? I do not, since it is not the service I ordered.
I hope S&P gets hit with a much higher fine than $1 billion because their cooked ratings cost millions of us trillions.

Feb 05, 2013 10:22am EST  --  Report as abuse
Harry079 wrote:

“It is unclear why regulators may now be focusing on S&P rather than Moody’s or Fimalac SA’s Fitch Ratings.”


It’s POLITICAL PAYBACK time for lowering the credit rating of the US debt.

Most of us think that is CRYSTAL CLEAR.

Feb 05, 2013 10:39am EST  --  Report as abuse
Mott wrote:

It’s time has come.

These ratings are reactive measure of the existing conditions that are well known to all common-sense.

They lack the needed agility, accuracy and correlation levels and are of poor quality.

Either fix these or be held accountable for these wrong measures that are meant to guide the target community.

Feb 05, 2013 10:43am EST  --  Report as abuse
Mott wrote:

It’s time has come.

These ratings are reactive measure of the existing conditions that are well known to all common-sense.

They lack the needed agility, accuracy and correlation levels and are of poor quality.

Either fix these or be held accountable for these wrong measures that are meant to guide the target community.

Feb 05, 2013 10:43am EST  --  Report as abuse
Concernedcitz wrote:

It is fine to go after the credit rating companies who were part of the fraud, but why not go after the Wall Street bankers too? Don’t let them get away with the crimes they committed. Come on get all the bad guys – go after all the lobbyists too – clean house.

Feb 05, 2013 11:06am EST  --  Report as abuse
SayHey wrote:

Just another example of the government attempting to create the appearance of “doing something”. Ratings of securities are opinions – there are no allegations that anyone at S&P was bribed. Should Barney Frank be sued because he thought (or at least said) that Fannie and Freddie were in great shape?

Feb 05, 2013 1:03pm EST  --  Report as abuse
xyz2055 wrote:

Concernedcitz….first intelligent post I’ve read. But there is a problem with the S&P as well…here’s an example. Abacus. A package of subprime mortgages marketed by Goldman Sachs. Hedge Fund Manager John Paulson paid GS millions to hand pick some of the mortgages that GS put in this package for the express purpose of shorting Abacus. GS failed to disclose this. And Paulson made $1B when Abacus went belly up. Looks like a “Rico” violation to me..though I’m no expert. But the S&P gave Abacus a Triple A rating. How did the S&P arrive at a Triple A rating for this fund? I’d love to hear their explanation.

Feb 05, 2013 1:05pm EST  --  Report as abuse
USA4 wrote:

why not go after the people who borrowed more than they could afford to pay back and then defaulted on their mortgages? reason is because in most cases they didn’t break the law (although many did through fraudulent applications). that is the same reason you shouldn’t prosecute banks or rating agencies. Yes, the government can extract large sums of money from them because of the federal power of coercion, but the further we head down that path, the closer we are becoming to countries like Russia. The similarities of how these two governments deal with their enemies (in this case S&P because it had the audacity to downgrade the US credit rating) are stunning.

Feb 05, 2013 1:05pm EST  --  Report as abuse
crittertron wrote:

@LRT: LOL, “protected under free speech” !!!! so every con man in history should go free because they only said things & it was up to their victims to know better? Not all speech is free my friend, can’t yell fire in a crowded room, can’t incite violence, can’t con people either. That was one heck of a rich pig thing to say … it is about time we roast the pigs.

Feb 05, 2013 1:57pm EST  --  Report as abuse
Mott wrote:

USA4: “… go after the people who borrowed more than they could afford …”

Better – go after the predatory-lenders that sought-out and tempted this community that they knew cannot pay-up.

Feb 05, 2013 2:05pm EST  --  Report as abuse
Mott wrote:

Concernedcitz: It’s coming.. just wait for it and it’s matter of time in this inter-connected and accountable times.

Feb 05, 2013 2:07pm EST  --  Report as abuse
actnow wrote:

And what of Fitch’s, Moody’s, and a slew of others (including Fannie and Freddie)who have never been touched? It seems that the S&P downgrade of US debt triggered a retailation by the DOJ. Or should it be called the department of retribution? They haven’t seemed to have a problem going after states that are enforcing existing immigration laws, marriage laws, and drug laws, so why not punish a company for bringing attention to the looting of our national treasure too?

Feb 05, 2013 2:11pm EST  --  Report as abuse
USA4 wrote:

Mott- the predatory lenders? really? did someone make people take the money? hold a gun to their head and say sign here or I will kill you? the problem with this country is the desire to blame someone else for everything- relatively few want to take personal responsibility. And so we end up with the government dictating more of what everyone can and can not do. And, that is horrible. The proverbial “nanny state”- wildly inefficient and not what this country was based on, and not good for our future prospects (if you want a flavor of where this mentality takes you, read up on what is happening in Greece)

Feb 05, 2013 2:23pm EST  --  Report as abuse
ptiffany wrote:

S&P lowered federal debt ratings a couple of years ago for political, not economic reasons, but Moody’s and Fitch did not.

There’s little incentive for the DOJ to go after Moody’s and Fitch as well, especially since the major investor in Moody’s is also the Head of Berkshire Hathaway and America’s favorite billionaire advocate for the working poor (without contributing a Rockefeller dime). This is the same guy who said that these triple-A ratings of toxic CDOs were “screwy”, but did nothing to stop it. It would be embarrassing to a lot of the Members of the One Percenters Club to have this fiscal populist hero sharing a cell in the same block as Bernie.

Feb 05, 2013 2:31pm EST  --  Report as abuse
ptiffany wrote:

It’s interesting that the DOJ has consistently claimed that they couldn’t find evidence or credible witnesses (whistleblowers) to prosecute the myriad of criminal fraudsters in the chain of Wall Street Casinos who felt entitled to demand taxpayer reimbursement for their gambling losses – at full value! (Having worked in that industry, we all know that there are thousands of potential witnesses who knew of the fraud and enough mountains of evidence to bury Mount Everest.)

And, how did it take the DOJ five long years to determine a basis for civil prosecution of these “recent” acts of fraud?

Feb 05, 2013 2:37pm EST  --  Report as abuse
BillDexter wrote:

So, S + P rates securities. The government changed the rules about mortgage backed securities and the S + P rates securities. The DOJ threatened lenders with discrimination suits if the did not lower their standards for mortgages that would be bundled into these newly allowed securities, Barney Frank announced to the Nation that ‘he’ was making the dream of home ownership available to everyone, house prices doubled and S + P rates securities.

The bubble popped. The proponents of the new rules now blamed the effects of those rules on the institutions that were doing business under the new rules. Political rhetoric changed overnight from “the dream of home ownership” to “predatory lending practices”.

Now this. I can’t wait for opening arguments. “S + P owes restitution for the egregious act of believing the government”.

Feb 05, 2013 2:42pm EST  --  Report as abuse
ptiffany wrote:

USA4: Ideology, or Idiotology, trumps reality every time. Criminal behavior is okay and doesn’t need to be prosecuted by “big, bad government”. I suppose you believe that traffic lights are a waste of money and an intrusion by “big government”.

Did you get your latest welfare check or don’t they deliver them in mental institutions?

Were the Wall Street Casinos that ripped millions of people of trillions of dollars the example you hold up as the epitome of “efficiency”? Good grief!

Yeah, this is abusive. You’re so astute.

Feb 05, 2013 2:43pm EST  --  Report as abuse
DCA331 wrote:

This needs to be taken a step further. Criminal charges need to be levied against the parties responsible within these banks.

Feb 05, 2013 2:45pm EST  --  Report as abuse
ptiffany wrote:

BTW, most of the fraudulent mortgage applications were manufactured by Countrywide brokers. And, 90% of the mortgages that went underwater were not subprime loans as so frequently incorrectly reported by the complicit media. Countrywide, the largest mortgage originator than all the rest put together, sold loans that they knew were bad to Fannie Mae and Freddie Mac who trusted Countrywide to perform high-quality underwriting, but didn’t check. Gullible, or criminal fraud? Ask John McCain about his involvement in the previous S&L scandal. Gullible, or criminal?

Feb 05, 2013 2:50pm EST  --  Report as abuse
123456951 wrote:

When everyone is making money, everyone is happy and nobody plays fairly. When everyone loses, everyone blames everyone else, but in the end, all are to blame. To quote Shakespere, “All Are Punished”. The Fed is just looking for a scapegoat to make a few dopey constituents feel better about their losses.

Feb 05, 2013 3:00pm EST  --  Report as abuse
ptiffany wrote:

123456…: The Fed (Federal Reserve)? A “few”? You mean millions involving trillions of dollars reimbursed by the Fed with taxpayer funds like the Social Security and Highway Trust Funds?

“USA” is one of those freedom-loving “patriots” who hunkers down in his underground bunker surrounded by his arms cache while hugging an AK-47, just watching TV twenty hours a day and waiting for the big, bad government to come and attack him. He revers “heroes” like Joe the Plumber who rails against taxing people more with incomes over $250,000 even though he’s never made more than $50,000 in a year and hasn’t paid his taxes for over two.

He worships at the alter of crony capitalism and believes everything, EVERYTHING, that his masters the Tenth Percenters tell him to believe, especially about killer abortionists, rabid feminists and life-sucking, freeloading aliens and welfare recipients.

He flaunts his membership in the National Rifle Association and doesn’t care that the major source of their funds comes from the gun manufacturers who have a captive audience in war-mongers and gun-totin Neanderthals who live in constant fear of being attacked by the ghoulies, zombies, govment bureaucrats and other college-educated elites who all hate God-fearing, church going folk who hate everyone who doesn’t adhere to their particular world-view.

He’s a proud member of the Ultra Wrong. He doesn’t even know that when they create databases of people likely to commit violence and shouldn’t have arms, his behavior is certain to qualify.

Feb 05, 2013 3:21pm EST  --  Report as abuse
ptiffany wrote:

I’ll take your comment seriously. The DOJ has been claiming for five years that they can’t find evidence of criminal fraud, nor credible witnesses willing to testify.

Having worked in that industry for many years, I can tell you that thousands of people were aware of the fraud and most said nothing. Also, the loan originators are required by a host of laws to maintain detailed records of loan applications on the Uniform Retail Loan Applications (URLA, form 1033). Countrywide, the largest loan originator and servicer, has every single application and the underwriting anaylsis in archive. They sold millions of loans rated “NOT RECOMMENDED” to Fannie Mae and Fredie Mac to be packaged into toxic (crap) mortgage-pools and packaged and sold as Collateralized-Debt Obligations (CDOs) and backed by Credit Default Swaps (CDSs) with no collateral at all.

When I discovered all this fraud about five months after starting to work at Countrywide, I resigned. They did a lot to try and keep me from resigning including carrots and sticks, even threatening coworkers who sided with me. I learned there were a lot of people who railed against the fraud and were either ignored or threatened. Many of them did have the guts to be whistleblowers, but the DOJ kept insisting they didn’t exist.

The question now is why is the DOJ pursuing a lame civil suit – $5 billion is insignificant compared with the trillions lost in the fraud – five years after the fact and claiming it’s “recent”?

Feb 05, 2013 3:36pm EST  --  Report as abuse
GeorgeBMac wrote:

1st: Fraud is criminal offence. The people who conducted this fraud should be in jail. Instead they walked away with multimillion dollar bonuses. Now their stockholders will have to pay a fine.

2nd: This fraud cost the US taxpayers trillions. So why only $5billion?

3rd: S&P was one of many — including the other rating agencies, banks, mortgage companies, appraisal companies, etc… So why is S&P the only one to get a slap on the wrist?

Feb 05, 2013 3:49pm EST  --  Report as abuse
ptiffany wrote:

A couple of the others commented on why S&P was the only one (so far) to be charged by the DOJ, especially leaving out Warren Buffet’s Moody’s and Fitch that didn’t go along with S&P when it lowered federal debt ratings and labeled that action political, not economic. The proof was in the fact that US debt continued to sell and with even LOWER record-breaking interest rates, not higher, ever since.

Moody’s and Fitch were complicit in the triple-A ratings fraud, costing millions of people trillions of dollars. But, they didn’t go after the US government. S&P was doubly stupid.

Feb 05, 2013 4:05pm EST  --  Report as abuse
CF137 wrote:

Attaboy Barry…Mama needs her EBT recharged!

Feb 05, 2013 4:18pm EST  --  Report as abuse
BillDexter wrote:

Wow. “trillions lost in fraud”. A ratings house is held responsible for the pop of a price bubble that everyone saw coming. People, this was done deliberately to allow minority home ownership. This was a scam for political gain. Sure, you may have been educated to despise capitalism and rich people and to call fascism and socialism ‘economic justice’ but where exactly did these ‘trillions’ come from? Taxpayers? Pure fantasy. Any lawsuit(s) belong to the shareholders, not the public. Nothing was lost in the collapse that was not due exclusively to hyper inflated prices – and that was caused by the rule changes and pressure to give mortgages to everyone – and that, people, was the government’s doing.

Feb 05, 2013 4:25pm EST  --  Report as abuse
americanguy wrote:

Please go after Goldman Sachs next.

Feb 05, 2013 6:50pm EST  --  Report as abuse
breezinthru wrote:

So what will be done with the 5 billion USD? I bought my house in 2006 to live in, not to flip. I put 50K down. Home prices have come back some, but I it’s still worth less than what I owe. I’m 58 years old and will probably never be able to sell my house and break even.

I have never made a late payment. Since S&P’s fraud caused the bubble by allowing people to purchase homes even when they could not afford them and since I lost more than 50K when the bubble popped, perhaps people like me should be compensated for losses incurred.

Feb 06, 2013 1:03am EST  --  Report as abuse
josephdupont wrote:

If justice was to prevail most of the Wall Street gang , GW Bush, Eric Holder , Obama and many others would be in prison. I’m sure Standard and Poor’s is no angle. But it seems true to form that this vindictive president would unleash the US Justice Department on S&P after they alone downgraded U.S. government bonds in August of 2011. This caused Obama considerable embarrassment at a time when his re-election was far from certain.

Benghazigate, Fast and Furious and now maybe S&P Gate. I would say that S&P should take the position of a whistle blower on the imploding state of Obama’s economy. Just like Obama was infuriated when he was mocked on his position on Capital Gains during the debates with Hillary, I’m sure S&P infuriated Obama too. And to think we thought “Tricky” Dick Nixon had some mental issues!

Feb 06, 2013 8:41am EST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.